More than half of lenders in the lifetime mortgage market have increased interest rates within their range in the last quarter, according to data from Moneyfacts.
Aviva, Hodge Lifetime, Just, LV=, Legal & General, and Vernon Building Society all increased their rates in the third quarter of this year, leading to the average lifetime equity release rate reaching 5.10 per cent in November, up from July's 5.03 per cent.
Moneyfacts said the year had seen an influx of competitive rates, with the average lifetime mortgage recording its lowest ever level in July, however lenders were starting to factor in interest rate rises after the base rate was raised to 0.75 per cent in August.
Despite this, Moneyfacts said the equity release market was nowhere near as volatile as the residential mortgage market, which saw the average rate for a mortgage of up to 50 per cent LTV rise from 4.67 per cent to 4.83 per cent over the same period.
Rachel Springall, finance expert at Moneyfacts.co.uk, said: "The equity release market has listened to the consumer demand for more flexibility, and, as a result, lifetime mortgages are becoming more popular, so much so, that record amounts are being unlocked through equity release.
"It’s encouraging to see the market adapt to create more flexible products, such as those that provide a drawdown option to suit those looking to draw cash as and when they need it rather than take a large upfront lump sum.
"Whilst consumers need to seek advice from an independent financial adviser that specialises in equity release, it can be beneficial to find one who also advises on mortgages, so they can work out the best point of action by going through all the latest options to hit the market – including retirement interest-only mortgages, for example."
The number of equity release products on the market has increased substantially in the past couple of years.
Data from the Equity Release Council showed £1.02bn was released in the third quarter of 2018.
Ms Springall said about 82 per cent of the lifetime mortgage market now provide a free valuation, while the number of deals without a product fee was growing too. However these deals still account for less than half the market share (41 per cent), she added.
Christopher Woolard, FCA’s executive director of strategy and competition, said in a speech at UK Finance Annual Mortgage Conference today (6 November) the regulator had concerns about the growth of lifetime mortgages and the potential for lenders to loosen their criteria as the market heats up.
FCA data showed lifetime mortgage sales growing both in number and value, and as a proportion of total mortgage sales.
Over the last five years sales have nearly doubled and in the first half of this year alone the FCA registered nearly 20,000 sales – around the same as the total figure for 2013.
Mr Woolard said these were concentrated around borrowers aged about 70 but the FCA was seeing a gradual upwards trend in the younger 56 to 60-years-old group, who now represented 7 per cent of all lifetime mortgage sales.