1 Month
Ask Rachel
Working in the financial industry for over 30 years, Rachel Thrussell is the leading independent expert on UK savings products. Her views are constantly in demand from both the industry and the press.
I’m aware that the Financial Services Compensation Scheme (FSCS) covers deposits of up to £85,000, including interest, but I was wondering how this applies to banks such as Al Rayan that operate according to Sharia’a principles and pay expected profit rather than interest. Would the FSCS cover this ‘profit’ in the event of such a bank failing?
The FSCS offers financial protection in the event that a bank or building society were to fail. Under current rules, £85,000 is covered per person, per banking licence, which means that if you held no more than this amount with any provider, you’d be guaranteed to get your full balance returned to you if a bank went bust. This includes your initial deposit, as well as any accrued interest, provided the full amount doesn’t exceed the £85,000 limit.
This applies to banks operating under Islamic finance principles as well. So, yes, the FSCS would cover any profit in the event of a Sharia’a-compliant bank failing.
This week's
average rates
| No Notice | 0.19% |
| Notice | 0.48% |
| Cash ISA | 0.49% |
| 1 Year Fixed Rate Bond | 0.54% |
| 2 Year Fixed Rate Bond | 0.66% |
| 3 Year Fixed Rate Bond | 0.76% |
| 4 Year Fixed Rate Bond | 0.90% |
| 5 Year Fixed Rate Bond | 0.97% |
| 01 December 2020 | |
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The lowest lifetime mortgage rates available during November
A lifetime mortgage can be a good way for those in retirement to boost their income, especially as rates have been falling for the past few years. To give an insight into what rates to expect when considering a lifetime mortgage, these are the lowest rates available on plans that allow drawdown during November.
The best drawdown rates with a fee
The lowest lifetime mortgage rate on a plan that offers drawdown and charges a fee is 2.7% AER, which is being offered by two
plans from Legal & General Home Finance: its Flexible Orange and Optional Payment Orange plans, both of which are available
on properties valued at a minimum of £100,000. A minimum advance of £10,000 is required and both plans charge a fee of £599.
Interest is not payable on Flexible Orange but partial repayments of up to 10% are permitted without an early repayment charge;
conversely, interest is payable on Optional Payment Orange, but partial repayments are not allowed.
Pure Retirement also offers a rate of 2.7% AER on its Classic Lite Plus 2 plan, which is available on properties valued at a minimum of £125,000. Borrowers must take a minimum advance of £10,000. A product fee of £500 is charged and interest is not payable on this plan, while penalty-free partial repayments of up to 10% are permitted.
The best equity release drawdown rates without a fee
The lowest lifetime mortgage rate being offered on an equity release plan charging no fee and offering drawdown comes from LV=,
which offers a rate of 2.54% AER on its Lifetime Mortgage Drawdown+ Standard 2 plan at a maximum loan-to-value (LTV) of 30%.
A slightly higher LTV (32%) is available at a rate of 2.57%. Both plans are available on properties valued at a minimum of £100,000
and borrowers must take a minimum advance of £10,000. Interest is not payable on either plan, but penalty-free partial
repayments of up to 10% are allowed.
More 2 Life offers a rate of 2.66% AER on its Capital Choice Superlite Drawdown 3 plan and a rate of 2.67% AER on its Capital Choice Superlite Drawdown 4 plan. Both plans are available for properties valued from a minimum of £100,000 and borrowers must take a £10,000 minimum advance. Interest is not payable, but partial repayments of up to 10% are allowed without penalty.
There are many more options available, but ultimately, releasing equity from your home has a long-term impact on finances and the inheritance you leave behind. As such, those considering equity release should think about speaking to an independent financial adviser before taking out a plan to ensure it is the right option for your financial circumstances.
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