The Rise of Pep Mortgages: A Flexible Financial Solution

Strategic Insights -

As Adrian and Louise Sims navigated the challenges of purchasing a new home in Leigh, they sought the expertise of their financial adviser, Stephanie Burton, to create a tailored financial plan. The solution they chose was a Pep mortgage, courtesy of Fidelity Investments, which provided a packaged deal that included a mortgage from Bank of Ireland, life assurance from Zurich Insurance, and a Fidelity Pep to invest their money. This arrangement allowed the Sims to enjoy flexibility in their loan payments, enabling them to pay off the loan early if their plan performed well or adjust their payments if needed.

Key Takeaways:

  • The Sims extended their mortgage by £23,000 and used a Pep mortgage plan to reduce administrative hassles and potential cost savings.
  • Fidelity's Pep mortgage plan is a packaged deal that includes a mortgage, life assurance, and an investment vehicle, providing flexibility in loan payments.
  • Pep mortgages are becoming increasingly popular, but it's essential for those moving up the housing ladder to reassess their existing financial provisions, such as endowment policies, to avoid jeopardizing their financial stability.
  • Financial advisers like Stephanie Burton stress that it's often a mistake to surrender existing endowment policies when moving to a new mortgage, and advise keeping them active while using the Pep mortgage for the additional loan.

Statistics:

  • The Sims extended their mortgage by £23,000 to purchase their new home.
  • The Fidelity Pep mortgage plan enables borrowers to adjust their loan payments if needed, providing flexibility in their financial plan.
  • 65% of those moving up the housing ladder plan to use a Pep mortgage, citing its flexibility and potential cost savings.

Sources:

  • The Sunday Times, 1994
  • Stephanie Burton, Financial Adviser, Astbury & Co.