The average lifetime mortgage rate has tumbled to 7.13% since the start of this month, down from 7.33%, according to the latest data from Moneyfacts.co.uk.
Lifetime mortgages are the most common type of equity release plan, the other being home reversion. They offer homeowners aged 55 and over the opportunity to release money invested in their home.
But, as with standard mortgages, over the last year rates have been rising. In fact, in November 2022, the average rate hit 8.13% – the highest on Moneyfacts’ records.
For those keen to take out equity release, the option at the beginning of the year were dwindling, but things have now picked up, according to Moneyfacts.
It said the choice of deals now stood at 312 compared to 179 in January.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “A lifetime mortgage could be an option for borrowers to use some wealth from their home to support their retirement plans or help towards the cost of living.
“Those weighing up their options may be pleased to find that lenders have been making rate reductions this month, and that the choice of deals is resilient. The choice of lifetime mortgages has been relatively stable over recent months, but there has been encouraging growth compared to the start of this year.”
How to find the best equity release deal
According to Moneyfacts several of the lenders in the equity release market have cut rates in their ranges this month. When it comes to options, Legal & General Home Finance has over 80 deals available in its range.
However, anyone considering taking out equity release must speak to an adviser before proceeding with an application.
There are many different options you can choose from, including products which allow you to drawdown the money rather than take it as a lump sum. You may also make voluntary repayments which can help reduce borrowing costs.
The Equity Release Council reported Q3 2023 (June to September) was the busiest quarter so far this year for lending. The report also revealed 53% of new customers opted for drawdown lifetime mortgages during the same quarter.
Springall said: “As interest rates have been volatile year-on-year, it’s not too surprising to see a slight preference for this option versus taking a lump sum, particularly as the average equity release rate stood at a record high of 8.13% in November 2022.
“A drawdown option may be more enticing for homeowners who only need to release a small portion of wealth when they need, which will mitigate incurred interest.”
