Equity Release 

Equity release rates drop to lowest on record

Equity release rates drop to lowest on record

The cost of equity release is declining as lenders push down rates, with the average rate now sitting below 5 per cent for the first time.

Latest research from Moneyfacts, out yesterday (June 12), found that the average equity release rate for fixed and variable rate mortgages now stands at 4.99 per cent — the lowest level since the site’s records began in 2007.

This comes after a period of rate slashing in the equity release market. The average rate stood at 6.11 per cent five years ago and 5.10 per cent this time last year.

On top of this, consumer choice in the market has increased by about 330 per cent since 2014. 

Those looking for equity release now have 207 lifetime deals available, compared with 164 a year ago and 48 five years ago.

Lifetime equity release deals

Jun 2014

Jun 2017

Jun 2018

Jun 2019

Number of deals overall

48

100

164

207

Average rate overall (fixed and variable)

6.11%

5.22%

5.10%

4.99%

% of deals with a product fee

96%

78%

57%

66%

Source: Moneyfacts

In April, figures from the Equity Release Council said the market had its busiest start to any year on record this year while just yesterday (June 11), data from the BoE showed lifetime mortgages had made their biggest contribution to mortgage market activity since records began.

Rachel Springall, finance expert at Moneyfacts, said: "The equity release market has evolved considerably over the years, with choice increasing and rates reducing as a result – the market has become much more accommodating to prospective borrowers.

"While rate alone should not be the deciding factor when choosing a lifetime mortgage, it is still a positive indicator that competition is rife in the market."

Ms Springall went on to say that as 66 per cent of the market charged a product fee, borrowers needed to be wary of the upfront cost of any deal on top of the flexibility that can come with deals that allow borrowers to draw funds.

Alice Watson, head of marketing and communications at Canada Life Home Finance, said the demand that had brought down the average rate was partly down to product innovation.

She said: "Much work has been done to improve the flexibility of equity release products. This has certainly made them more accessible and adaptable, catering for a greater range of circumstances.

"Advisers are critical to the sector’s upwards trajectory but the current advice gap may impact the market’s momentum.

"That is why it’s so important the sector does all it can to ensure advisers have access to the information and support they are asking for."

Stuart Wilson, marketing director at More 2 Life, agreed that product innovation was high on lenders’ agenda but added a further push was needed for more flexible products that could "cater to the customers of today".

Will Hale, chief executive of specialist adviser Key, said: "Equity release rates are now closer than ever to those of standard residential products starting from as little as 3.32 per cent fixed for life.

"However, when speaking to clients, advisers also need to ensure that they explain the impact of features such as the ability to make interest repayments, why downsizing protection might be useful and how inheritance protection works.