The average fixed rate for equity release deals has plummeted in the past year, new research has revealed.
According to Moneyfacts.co.uk, the average fixed rate equity release deal has fallen to a record low of 5.63%, down from 6.33% in April last year.
The number of fixed equity release options has increased by a third in just two years, up from 52 options in 2015 to 82 today, the highest recorded figure in eight years.
Equity release gives you access to the wealth tied up in your property without having to sell or move home. It is designed for older homeowners who own their property outright or have relatively small mortgages to pay.
You can borrow against the value of your home, sell it or part-exchange it for a lump sum or a regular monthly income.
A lifetime mortgage is a long-term loan which you can use to extract your funds in a single lump sum or in smaller amounts over time through what is known as drawdown. Home reversion plans allow you to access all or part of the value of your property while retaining the right to remain in it rent free.
Rachel Springall, finance expert at Moneyfacts.co.uk, said: “The rise in product choice and reduction in cost for fixed deals will be exciting news for those who have equity locked up in their homes and are eager to make better use of the cash. New brands, more drawdown options and an influx of incentives have also appeared to appeal to a variety of customers.
“Consumers these days may well be facing a retirement shortfall or have failed to set aside enough cash for potential care fees, so an equity release deal could give them a vital sum to enable them to enjoy their later years much more comfortably.
“Committing to an equity release deal shouldn’t be taken lightly, and there will usually be fees to pay for advice, valuations and legal costs. Therefore, it would be wise for prospective borrowers to consult with their family members, particularly if they are concerned about leaving an inheritance.
“Thanks to increased choice, consumers must now be more diligent when comparing deals, so seeking independent financial advice may prove vital. The lowest rate isn’t always the best option when it comes to picking the right equity release plan, and consumers may well prioritise how much they can receive in a lump sum instead.
“Coupled with differing eligibility criteria such as a variety of minimum age requirements for borrowers, means that the equity release minefield could be much easier to tread when armed with good independent advice.”
What Mortgage has teamed up with London & Country to offer you expert advice on the right mortgage deal.
Whether you’re buying a new home, remortgaging to a new deal or buying an investment property, L&C can help – and you’ll pay no fee for their advice. To find out more, click here.
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