A third more homeowners in the first half of 2019 used a lifetime mortgage to release equity from their home than two years ago.
The latest data from the Equity Release Council reveals the number of homeowners releasing equity is 32.4% or 10,105 higher for the first half of the year than two years ago.
Property plays an important role in retirement with 41,263 equity release buyers accessing cash from their home in the first half of 2019 compared to 31,158 for the same period in 2017.
You can release cash using a home reversion plan, however, a lifetime mortgage is more popular and offered to those aged 55 years with £1.85 billion accessed in the first half of the year with almost £4 billion in 2018.
The amount released for new single lump sum plans is £95,857 and for drawdown cash over time, the amount is higher at £62,800 which can be used to repay an interest only mortgage or pay for care at home.
More flexibility with lifetime mortgages
Providers have introduced increasing flexibility to lifetime mortgage plans with features and options increasing from 126 in August 2018 to 287 this year, an increase of 128% over the year.
Homeowners can use a lifetime mortgage when relocating and buying a new property and some providers allow buy-to-let landlords to release equity from their property portfolio with no interest payments to make, increase their income in retirement.
The following table from the Equity Release Council shows the number of mortgage plans that include the features and options in August 2018 and 2019.
| Features and options | 2018 | 2019 |
|---|---|---|
| Sheltered/age accommodation | 42 | 155 |
| Making interest payments | 22 | 81 |
| Downsizing protection | 63 | 129 |
| Inheritance guarantee | 51 | 96 |
| Drawdown facilities | 47 | 88 |
| Overpayments with no ERC | 99 | 178 |
| Fixed early repayment charges | 75 | 116 |
| Receive regular income | 0 | 16 |
Providers have improved the availability of equity release for properties with Sheltered age restricted accommodation increasing 269% from 44 to 155 plans offering this feature.
Other improvements are features including making interest payments rising 268%, downsizing protection up 105%, inheritance guarantees are 88% higher and drawdown facilities up 87%.
There are also more plans allowing people to make overpayments without an early repayment charge (ERC) and types of plan structures to consider such as plans with fixed ERC penalties rather than gilt based which could be very high.
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.
Average rates below 5% for first time
Equity release fixed rates for lifetime mortgages have reached a record level low of 4.91% with 58% of all products offering rates under 5% or less with 21% priced at 4% or below and this helps to leave equity for beneficiaries.
Have a look at the figures to release cash from your property and interest rates over time for the lifetime mortgage using this link:
Free equity release calculator with instant results using different interest rates.
Increasing competition is driving the cost lower and is good news for older homeowners as it is estimated there are 20.5 million people aged 55 plus in the UK with 1.6 million aged 85 plus.
The best provider fixed interest rates for a 70 year old releasing 20% of the property value is 2.93% from Aviva and for larger amounts such as 35% the rate remains a competitive 3.05% from more2life.
Competitive rates offered to older equity release buyers are now similar to those offered to first time buyers with a 95% loan to value (LTV) selecting a five year fixed mortgage rate.
For home movers or remortgage buyers selecting a ten year fixed mortgage rate with larger equity amounts and an LTV of 80% the rates would also be similar at just under 3.0%.
For those owner-occupiers the number that own their own home outright has shifted towards older age groups as for 2017/18 and for those aged 65 plus about 64% have no mortgage debt.
What are your next steps?
Talk to our London City Mortgage advisers if you are an older homeowner releasing equity from your property, we can recommend the lifetime mortgage, managing the process of provider valuation and offer.
Lean about the best providers and products for a lifetime mortgage if you intend to release cash from your home and gift to your family at this link:
Free equity release quote for products to access money to gift to your family.
At LCM our mortgage advisers can find the best providers and products. Learn more by using the equity release calculator, property value tracker chart and mortgage costs calculator.
