Equity release sees a strong start to 2018

Equity release home painting

Growing demand for equity release from record numbers of homeowners has led to a dramatic increase in the number of product options available along with clearer guidelines and regulations resulting in less equity release myths.

The range of equity release product options has grown 25% year-on-year, according to the Equity Release Council’s latest Spring Report. An increasing number of products enable customers to make ad-hoc, penalty-free voluntary repayments if they want to, so they can keep interest charges to a minimum. It is worth noting however, that a lifetime mortgage will reduce the value of your estate, and may affect your entitlement to means-tested state benefits. You can be provided with a personalised illustration to help you understand the features and risks.

Many offer a range of other flexible features. For example, almost half of equity release products now offer inheritance protection, which enables customers to ring fence part of their housing wealth as a guaranteed minimum amount to pass on to beneficiaries, regardless of the total interest that builds up over time. Two in five products offers downsizing protection, which means if you take out a product but subsequently decide to downsize, you can repay what you owe without penalty.

Equity release rates continue to fall

As well as there being more flexible options available, average equity release interest rates are falling, despite the Bank of England raising the base rate in November last year. The average rate for equity release products in January this year was 5.14%, although the average customer pays less than the average product rate suggests. For example, in the second half of last year, the average rate secured by customers stood at 4.44%.

The average rate for new customers taking lump sum plans in this period was 5.31% compared to 4.17% for drawdown customers. Drawdown plans, as the name suggests, allow customers to release funds as and when they need them.

Equity release moves from “niche to mainstream”

The Council said that total lending has doubled in the last two years, increasing 90% from £1.161 billion in 2015 to £3.06 billion for 2017.

Separate figures from equity release provider Responsible Life show that the homeowners released on average almost £83,000 from their properties in February this year.

Although this is lower than the average £87,000 released in January, the total amount of equity released by homeowners so far in 2018 is more than double (132%) the total amount released during the same period in 2017. The total number of people taking out equity release plans in the first two months of 2018 is up 93% on the corresponding period last year.

Steve Wilkie, managing director, Responsible Life, said: “The equity release market has had a strong but steady start to 2018, and the range of people with specific requirements that can now benefit has seen equity release products move from niche to mainstream.
“We’re still seeing plenty of enquiries from people who took out interest-only mortgages on their homes which are coming to an end and are struggling to remortgage. But we talk to just as many retirees who are keen to have an equity release drawdown facility, so that they don’t have to take money out of their pensions while stock market volatility is so high. The home has become a viable income source, filling the retirement income gap left by poor performing savings accounts.”

Use our equity release calculator to see how much wealth you could release from your home and join the thousands of other British homeowners enjoying a more comfortable and happy retirement.

The above article was created for Telegraph Financial Solutions, a member of The Telegraph Media Group. For more information on Telegraph Financial Solutions click here.