Cuts to the rates of interest homeowners pay on their equity release borrowing against their property are driving client enquiries about switching deals.
Research from equity release adviser Bower Retirement pointed to 53 per cent of advisers reporting a rise in clients looking to move their existing deal to a lower rate – with 12 per cent saying the increase was “substantial”.
Increased competition among existing lenders and new companies entering the growing market have meant rates falling to new lows, according to Bower.
Average rates are currently around 5.66 per cent, according to Moneyfacts data, and have fallen by nearly 1 per cent in the past three years while the number of plans available has nearly trebled over the same period.
Equity release loans are secured against the borrower’s home and are paid back when the home is sold. The borrower still owns the home, and the amount owed increases over time as interest is added.
Currently providers have historically low rates with some lenders offering deals below 4.3 per cent potentially enabling existing customers to move their plan.
However Bower’s study found advisers believe the market needs more competition if it is to maintain recent strong growth – around 78 per cent questioned said new lenders coming into the market would be the best way to maintain momentum.
Advisers also want to see more innovation with 34 per cent calling for more retirement lending while the same number said further rate cuts would be the best way to continue market growth.
The Equity Release Council has forecast the market will exceed £2bn for the first time in 2016.
Andrea Rozario, chief corporate officer at Bower Retirement said: “Increased competition in the market with new lenders such as Legal & General and OneFamily launching has meant rates have fallen significantly as the market has grown.
“That is reflected in the growing interest in switching plans but it is vital that customers considering moving get independent advice as any savings from lower rates need to be balanced against any early redemption charges or other costs.
“New lenders coming into the market demonstrate the growing demand there is but it is also clear advisers want to see more providers launching this year to further enhance competition.”