Equity Release Rates Fall To All Time Lows

Written by Editorial Team
Last updated: 13th December 2022

Data from the Equity Release Council (ERC) showed that in July 2020 equity release product rates fell to record levels, with over 50% offering a rate of 4% or lower and 20% of products available offering less than 3%.

In addition the Equity Release Council also reported that consumer choice on products available rose 29% compared to July in the previous year.

Over 50% of plans available allowed downsize protection with a third of products providing customers the option of making full or partial interest repayments.

Research showed that the average property price for new drawdown plans was £346,157 above the UK house average value of £234,612.

Providing comment David Burrowes of the ERC said:

“The unprecedented uncertainty of the first six months of 2020 has affected households and businesses alike, with the equity release market no exception.

“While pent-up demand in Q1 led to a strong first quarter, the impact of COVID-19 and the lockdown dominated Q2 before showing initial signs of recovery in June.

“Despite this uncertainty, the market has shown resilience and consumers considering equity release continue to find a wide range of product options on the market, while the average rate has fallen considerably over the last eighteen months.

“As the UK’s ageing population seeks to fund increasingly longer retirements, property wealth can play a fundamental role for many people, both now and in the future, as part of a more joined-up approach to planning for retirement.

“The challenges that lie ahead show no signs of easing, so it is important that people are aware of all the options available to them to help fund later life.

“We believe the robust standards upheld by the Council, which were evolved last year to be outcomes-focused, provide the highest level of consumer protection of any later life property-based loan.

“Looking ahead, we are committed, now more than ever before, to working with members, industry, government, and regulators to ensure the best possible consumer outcomes.”

What is equity release?

Equity release is available to UK homeowners aged between 55 and 95 and allows you to release capital from your home.

The money released can be used for any purpose, and can be taken as a tax free lump sum or in smaller amounts if preferred.

It is becoming an increasingly popular way if you are approaching retirement to boosting your finances in retirement.

Key features include:

  • Available to homeowners aged 55 to 95
  • Release capital tax free from your home
  • You choose how to spend the money
  • Lump sum & drawdown options
  • You cannot release equity without taking advice

How does equity release work?

The most popular way of releasing equity from your home is via a lifetime mortgage. This can be a lump sum lifetime mortgage where based on the value of your property and your age you are given access to a one off pot of cash whilst still owing your property. Alternatively a drawdown lifetime mortgage allows you to draw down cash after an initial lump sum and you only pay interest on the money which has been released.

One of the attractions of equity release for many people is that you do not have to make monthly repayments.

Many products allow you to add interest to the initial loan (known as roll up or compound interest). The loan and accumulated interest is repaid one the plan comes to an end, typically when the last remaining borrower in the house either passes away or moves into long term care. At that point the house would be sold and the equity release provider would be repaid from the proceeds.

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Equity release may affect your entitlement to state benefits and will reduce the value of your estate. It may involve a lifetime mortgage or home reversion plan. All content set out in this website is provided for information only and should not be considered as advice. It is strongly recommended that you seek advice of a qualified, independent financial advisor before making any decisions to take out an equity release product.