The average equity release rate dropped to a record low of 4.48 per cent in the second half of 2019, with two in five products charging less than 4 per cent by the end of the period.
According to the Equity Release Council’s spring 2020 market report published today (April 21) this compared with fewer than one in 10 products charging such low rates in January 2019.
At the same time £1.81bn of wealth was released by homeowners in H2 2019, adding to a total for the year of £3.92bn.
Mark Gregory, founder and CEO of Equity Release Supermarket, said: “The gap between lifetime mortgage interest rates and residential mortgage SVRs continues to narrow and lifetime mortgage lenders are expanding the range of flexible features available.
“The ‘new breed’ of lifetime mortgages is attracting a younger and financially savvier customer looking to use lifetime mortgages as an alternative to traditional mortgage lending or as a solution to satisfy shorter term lending needs.
"This dispels the myth that younger people should not consider equity release because of the effects of compound interest. The ability to manage both interest and capital repayments is now widely available."
The data showed the number of products available on the market rose to more than 300 for the first time in January 2020, marking a 42 per cent year-on-year increase as a result of competition and demand.
Products offering drawdown, the option to make regular interest payments and partial repayments, were also more widely available.
Drawdown lifetime mortgages remained popular, as 63 per cent of new customers opted for smaller amounts upfront over a lump sum.
Meanwhile, product data from equity release adviser Key showed two-thirds (67 per cent) of equity release products in January 2020 offered borrowers the facility to make voluntary or partial repayments without incurring early repayment charges.
David Burrowes, chairman of the Equity Release Council, said: “Reflecting on 2019, the equity release market remained robust, as for a second year running older homeowners unlocked nearly £4bn of property wealth.
“While uncertainty becomes the norm, property wealth will inevitably continue to play a role over the months and years to come, to help meet the wide-ranging needs of the UK’s ageing population.
“The increasing diversity of firms in the market reflects the wide range of consumer needs which property wealth is helping to address.”
The equity release market is expected to boom under the coronavirus crisis as consumers look for ways to raise cash.
Alan Lakey, director at Highclere Financial, told FTAdviser earlier this month he thought more people would turn to equity release to cover their mortgage or other bills.
According to FCA product sales data, the total sales of all mortgages to customers aged 56 and over rose by 25,212 between H1 2015 and H1 2019, indicating an increase in consumers taking out residential and lifetime mortgages for funds in later life.