Growing competition has pushed interest rates for equity release to a record-low, the chairman of the Equity Release Council has said.
Nigel Waterson was reacting to Andrew Bailey’s comments about retirement savings last week.
Speaking in Scotland, the chief executive of the Financial Conduct Authority said equity release could be one way for people to save for their retirement.
But he sounded a note of caution about the product’s cost and complexity.
Reacting to these comments, Mr Waterson said: “Growing competition in the market has resulted in record-low interest rates and new flexibilities appearing in recent years.
“These include products allowing the repayment of interest or capital where the customer can afford to, thereby reducing the overall cost, as well as products offering downsizing protection.
“Funding and pricing for lifetime mortgages differs from residential mortgages because of their inherently different features: for example, the guarantee of a fixed or capped rate loan for an indefinite period as well as security of tenure.”
One of the complexities Mr Bailey cited was the no negative equity guarantee, but Mr Waterson said was an “important source of reassurance” for consumers, protecting them from the risk of a downturn in house prices.
He said: “The fact that providers have borne this risk for consumers since the first industry standards were established in 1991 has been a vital part of establishing a safe and reliable equity release market.”
Equity release sales have soared in recent years, with homeowners over the age of 55 withdrawing a record £8.2m of housing wealth every working day between April and June this year.
According to the Equity Release Council’s quarterly figures, lending surged past £500m for the first time since records began.
