The competitive equity release market has seen over 100 products on the market as providers launch new features to attract customers.
Strong levels of competition from providers have seen 29% or 109 more equity release products in the last six months, according to the Equity Release Council, rising from 379 in July 2020 to 488 in January 2021.
Product availability increased from 202 in January 2019 as a result of strong competition and innovation in the market but reduced slightly in the first half of 2020 due to the impact of the pandemic.
Customer choice has also improved with more retirement interest only mortgages (RIO) rising from 38 in 2019 to 74 last year and 111 products this year.
In 2020 there were 72,988 homeowners accessing equity from property using a lifetime mortgage which is 10% lower than the previous year due to the lockdowns.
More product features from providers
There are many reasons for releasing cash from your home with 63% using the money for home and garden improvements, 30% to pay off debts or personal loans and 23% to help family members.
Providers are introducing more product features of lifetime mortgages with greater flexibility to reduce or increase the loan after they have been set-up.
This table from the Equity Release Council shows the percentage of products offering features with greater availability and flexibility for homeowners.
| Feature | Proportion |
|---|---|
| ERC free overpayments | 64% |
| Fixed early repayment charges | 56% |
| Offer drawdown facilities | 50% |
| Sheltered accommodation | 48% |
| Downsizing repayment option | 45% |
| Regular interest payments | 30% |
| Inheritance guarantee | 16% |
If repaying the mortgage early is important to you, 64% of products allow overpayments free of the early repayment charge (ERC) and 30% allow you to make regular full or partial interest payments.
To help you reduce the costs of equity release, 56% of products offer fixed repayment charges if you repay amounts greater than 10% of the mortgage that is ERC free.
If you would like to take future drawdowns, 50% of products can offer this facility and 45% offer a downsizing repayment option allowing the loan to be repaid free of the early repayment charge.
Providers apply a lending criteria of acceptable property for equity release and 48% of products are potentially available if you live in sheltered accommodation although this would be subject to lender requirements.
If you are concerned about leaving equity for beneficiaries, 16% of products include an inheritance guarantee to secure part of the property value.
More competitive interest rates
Providers are reducing interest rates due to more competition and the fall in gilt yields making equity release comparable to long term residential mortgages.
Average interest rates have reduced from 6.20% pa in January 2016 to 3.95% pa in January 2021, a fall of 2.25% pa over the last five years.
See how much you can release from your home and lower interest to reduce the cost of interest roll-up at this link:
Free equity release calculator with instant figures using lower interest rates.
This has a significant impact on the cost of a lifetime mortgage and for a loan of £50,000 with no repayments over 20 years, the interest savings would be £58,010 or 35%.
For lower loan to values (LTV) of 20% the interest is as low as 2.50% pa which can be compared to a 10-year fixed residential mortgage.
These interest rates are available for both types of plan structures to consider, either fixed penalty or gilt based penalty should you decide to repay the full mortgage in the future.
With equity release there are no affordability checks for the lifetime of the mortgage, the interest can roll-up or you can make ad hoc overpayments up to 10% of the original mortgage each year, free of the ERC penalty.
What are your next steps?
Speak to our London City Mortgage advisers if you need more flexibility from equity release, we can recommend the lifetime mortgage plan and manage the application through LCM.
Find out more about the most flexible products if you must repay a residential mortgage or release cash with this link:
Free equity release quote with flexible products and low interest rates.
Our expert advisers can source flexible products to meet your needs now and in the future. Learn more by using the equity release calculator, property value tracker chart and mortgage costs calculator.
