More 2 Life has added fixed early repayment charges (ERCs) to its Capital Choice Plan in addition to the current 10 per cent ERC–free partial repayment option.
This is the first time More 2 Life has offered fixed ERCs on an open market product.
Under the new plan, customers who repay their loan early will be penalised by no more than 5 per cent in the first five years.
In the second five years of the plan, they will be charged no more than 3 per cent, and after that there will be no penalty at all.
Dave Harris, managing director at More 2 Life, said the decision had been made after "working closely" with intermediaries.
With the equity release market growing steadily, it is important that lenders drive innovation in the sector.Dave HarrisHe said: "With the equity release market growing steadily, it is important that lenders drive innovation in the sector to allow a greater number of borrowers to access the wealth currently tied up in their homes.
"Property wealth is likely to account for a significant proportion of a client’s overall wealth, so it’s crucial that retirees have a greater range of options available to them."
He said the firm had more than doubled its market share in 2016, from 7 per cent to 15 per cent.
The business also saw the value of completions double, while individual applications increased by 63 per cent.
Simon Webster, managing director of financial planning firm Facts & Figures, said the early repayment penalties sounded like "a better deal" than those linked to gilt yield.
However, he questioned the need for such charges at all.
He said: "Lenders are already charging premium interest rates, and they also know full well that few if any can afford to ever exit."
james.fernyhough@ft.com
