Interest rates on equity release have plunged this summer so that more than half the products now offer a rate of 5% or less.
Average rates on equity release, which allows homeowners aged 55 plus to unlock cash invested in their home, fell to a record low of 4.91% in July.
Now, according to the Equity Release Council (ERC) which oversees the industry, a fifth of plans are priced at 4% or below.
One of the factors which has helped reduce prices, according to the ERC, is the rapid growth of the sector which has increased competition in the market.
Indeed, the numbers of products and amount of choice available has increased twofold since this time last year with 300 options now available to customers, the ERC revealed.
What’s more, there has also been plenty of innovation with new types of products being created to cater for different needs.
Wider choice
For example, there has recently been a ‘noteable’ increase in plans for people who are in sheltered or age-restricted accommodation.
There are now also double the number of products with ‘downsizing protection’ which offers assurance applicants won’t incur early repayment charges if they repay the loan following the sale of their home.
There are now also products which offer inheritance guarantees, which give customers the option to ring-fence part of their property’s value to leave loved ones as a guaranteed minimum inheritance.
David Burrowes, chairman of the Equity Release Council, said: “Older homeowners considering equity release have never before had more choice and flexibility to meet their changing needs and their families’, with average rates also at record lows.”
He added: “The market’s development has been driven by competition, reinforced by robust consumer protections and product safeguards. As the UK’s ageing population continues to grow, making use of housing wealth will be essential to help all generations meet the financial challenges they’re facing both today and tomorrow.”
According to equity release adviser, Key, there were a number of plans now for customers releasing cash on a smaller proportion of their property which actually had rates below 3%.
Make sure you get advice
But the firm’s CEO, Will Hale, warned the growing range of options and choice made it even more pertinent for potential customers to seek advice.
He added: “It is now more important than ever for customers to ensure that they speak to a specialist adviser who knows the later life lending market inside out.
“When it comes to equity release, it may be appropriate for some customers to pay slightly more to secure downsizing protection while for others finding a low rate with flexible repayment options is paramount.
“A good adviser will discuss these options with their customers, alongside the possibility of downsizing and other funding solutions, to ensure that should they wish to take out equity release, they do so confident in their decision.”
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What Mortgage has teamed up with Equity Release Supermarket to answer your questions on Equity Release.
To read this month’s Q&A or to submit your own query, click here.
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