Growing competition from lenders has seen more flexibility and choice for consumers and lower interest rates, says Moneyfacts.
The number of equity release deals has increased based on research from Moneyfacts intensifying competition and providing more choice to consumers and lower interest rates.
Equity release is based on provider loan to values that increase with age and is a popular way to help fund retirement, pay for home improvements or help family members without the need to downsize.
Demand continues to grow reaching a new high with lending of £500 million in the second quarter of 2016 according to the Equity Release Council.
For the first half of 2016 lending was £908 million rising by 28% or £198 million compared to the same period last year and the highest rise for a decade.
Older remortgage buyers that are forced by the lender to repay your current interest only mortgage at a certain age and rather than downsizing can agree a lifetime mortgage.
Loan interest rates falling
Interest rates on equity release deals have decreased offering better value to the consumer with fixed rates reducing from 6.42% in 2013 to only 5.66% in 2016.
See how the fixed interest rats are lower with a particular loan to value for your age and how this rolls-up over time with this link:
Free equity release calculator with instant results for different loan to values.
There are now 75 equity release deals available on the market rising 63% over the year up from 46 in 2015 and more than double the 29 deals in 2013 offering a whole range of options and loan to values (LTV).
Equity release lenders are also offering higher LTVs with over half of the lifetime mortgage deals offering 50% or above loan to values although this depends on the age and health of the consumer.
This means lifetime mortgages are more popular than home reversion plans was you are offered similar loan to values , you retain 100% ownership of your property and will benefit from rising house prices in the future.
Richard Eagling, editor of Investment Life & Pensions Moneyfacts said this compares to just a fifth of deals five years ago and highlights a change in direction for the sector.
The sector is responding to the greater demand from elderly equity release mortgage buyers looking to unlock cash from their homes by offering a more diverse range of products and options, said Mr Eagling.
With the Bank of England cutting base rates to 0.25% interest rates have reduced making the idea of equity release even more attractive with some fixed rate deals falling below 4.00%.
Average age is 70 for equity release
Data from the Equity Release Council shows the average age for taking equity release is 69.9 as they find greater equity at their disposal.
The number of customers aged 55-64 has increased from 17.4% to 21.2% year-on-year and may be a sign people are starting to look at housing wealth as a potential asset earlier in their retirement.
It could be that more find themselves with existing borrowing to clear such as interest only mortgages although the 65-74 age group is the largest followed by those aged 75 and over.
They can support family members and give to child or grandchild helping a first time buyer with the deposit for their first house or home mover with their next property.
Average house prices have increased up 8.1% over the year from £283,806 to £306,854 although consumers have not increased the amount they take.
You can drawdown cash over time where a first payment is taken and the balance held on reserve to draw on at a later date and this has reduced from 15.4% in 2015 to 14.5% this year.
The alternative is taking a lump sum where the average loan to value has dropped year-on-year from 32.0% to 27.6%.
Drawdown is the more popular choice with 67% of new plans and over half of the deals also offer the option to repay 10% of the loan each year without an early repayment charge.
Other innovative product features of lifetime mortgages from lenders is downsizing protection that have been running for five years, allowing you to repay the loan in full without an early repayment charge if this is done in conjunction with moving to another property.
What are your next steps?
Speak to our London City Mortgage advisers if you release equity from your home, we can recommend a lifetime mortgage product and you can talk to your family about the benefits.
Find out which products are offering the lowest interest rates to access cash from your property for a certain loan to value using this link:
Free equity release quote with lowest interest rates when releasing cash from your home.
At LCM our expert advisers can select the most suitable provider products to meet your objectives. Learn more by using the equity release calculator, property value tracker chart and mortgage costs calculator.
