Equity release interest rates remain low in 2019

Couple walking in the park discussing equity release interest rates

Growing demand for equity release from record numbers of homeowners has led to a dramatic increase in the number of product options available which allows customers to keep equity release interest rates low

The range of equity release product options has grown 23% 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 equity release interest rates 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.

Including equity release interest rates remaining low, many offer a range of other flexible features. For example, almost two-fifths 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. Over half of products now offer 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 interest rates remain low

As well as there being more flexible options available, average equity release interest rates remain low, despite the Bank of England raising the base rate in August last year. The average rate for equity release products in January this year was 5.21%, 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 drawdown customers stood at 4.22%.

The average rate for new customers taking lump sum plans in this period was 4.98%, lower than the same period last year.

Equity release moves from “niche to mainstream”

The Council said that total lending has increased for a seventh consecutive year to reach £3.94bn.

Separate figures from equity release provider Responsible Life show that homeowners released on average £73,285 from their properties in the first three months of this year.

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The total number of people taking out equity release plans in the second half of 2018 was up 23% year-on-year to 43,879 homeowners.

Steve Wilkie, managing director of Responsible Life, said: “The equity release market has had a strong but steady start to 2019, 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.

The Telegraph Equity Release Service is provided by Responsible Equity Release. Responsible Equity Release is a trading style of Responsible Life Limited. Only if your case completes will Responsible Life charge an advice fee, currently not exceeding £1,490.