Derin Clark

Derin Clark

Online Reporter
Published: 27/02/2019

A growing demand from consumers searching for options to release cash from their homes has had a significant impact on the equity release market over the past five years, research from Moneyfacts.co.uk has found.

The research reveals that the number of equity release deals available has expanded enormously over the last five years. Today, there are more than 200 lifetime equity release deals on the market, five times more than that seen in 2014 when there were just 40 products. In addition to this, the market has grown by more than 50% since a year ago, when there were just 131 deals available.

Equity release market analysis

Rachel Springall, finance expert at Moneyfacts.co.uk, said:

"Lenders have expanded their product ranges vigorously, in response to consumer demand for greater choice in the market and, as such, the number of deals available is now at its highest level. The market has expanded five times over from five years ago, showing that lenders are primed and ready with a variety of deals for prospective borrowers.

"The average overall interest rate for lifetime equity release deals has fallen slightly year-on-year, from 5.27% in February 2018 to 5.24% today, however the rates have risen since July 2018, when the average overall rate was its lowest recorded at 5.04%. Of course, interest charges are not the only cost to a borrower, and today 79% of the market charges a product fee. Despite this, it's encouraging that borrowers can secure a fixed deal for less than 4% if they shop around.

"One of the many elements of lifetime mortgage product to consider is early redemption charges. If borrowers are not careful, they could enter a deal where a penalty applies for as long as 10 years into the arrangement. Indeed, some consumers may have to pay as much as 10% of the advance in the first five years.

"It is worth keeping in mind that the equity release is not solely aimed at the equity rich but cash-poor or for those looking to plug the gap of their later life care costs. These types of mortgages could be an option for those hoping to soften any Inheritance Tax blow while lifetime mortgages may also be an alternative to borrowers who have considered downsizing, but who do not want to move and pay Stamp Duty."

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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