Moneyfacts.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfacts.co.uk will always be from firstname.lastname@example.org. Be Scamsmart.
Retired homeowners have benefited enormously from house price rises in recent years, leaving many with a significant amount of wealth tied up in their homes. Many are looking to make the most of that wealth, and happily, they've now got far more options: the number of equity release products available has more than doubled in the space of two years, highlighting the growing importance placed on equity release as a means of supplementing retirement income.
The figures, from the Equity Release Council's Autumn 2018 Market Report, show that the number of equity release options available has risen from 58 in August 2016 to 139 last month, as innovation in the sector continues to gather pace. This also means you've now got double the choice if you want to access some of your property wealth without needing to downsize, allowing you to use that cash for anything you wish.
The level of innovation can increasingly be seen in terms of the flexibility offered: 80% of product options now offer consumers the choice to make ad-hoc, penalty-free voluntary or partial repayments of their loan (up from 68% a year ago), while lifetime mortgages now include the option to ringfence equity, which means homeowners can retain some of the value of their property as a guaranteed minimum inheritance – a key consideration for many.
As such, it may come as little surprise to learn that the number of customers continues to increase, with the customer base rising by 81% between 2016 and 2018. A total of 38,912 households aged 55+ used equity release to unlock housing wealth in the first half of the year, including 21,490 new customers – up by 28% from 16,805 a year earlier – and a further 15,709 returning drawdown customers who made additional withdrawals from their plan, up 25% year-on-year.
Among those new customers, two-thirds (65%) opted for drawdown lifetime mortgages, while 35% chose lump sum plans and less than 1% agreed home reversion plans. Happily, these customers can not only benefit from a greater level of choice, but also lower prices, with the latest boost in competition driving down interest rates: the average interest rate for equity release products was 5.22% as of July 2018, down from 5.27% in July 2017 and from 5.96% a year earlier, as equity release becomes increasingly mainstream.
Find out more about equity release by reading our guide
Commenting, David Burrowes, Chairman of the Equity Release Council, said: "These figures highlight the rise in new products and increased product flexibility, which is helping older homeowners to fulfil a host of pressing personal, social and financial needs. This innovation has brought more competition to the later life lending arena, while maintaining the standards and protections that ensure equity release products are futureproofed to provide good outcomes for consumers."
David Burrowes noted the importance of advice in this sector "as customers navigate their way through a growing range of product choices," with appropriate support necessary to "weigh up the various benefits, costs, flexibilities and protections [and] ensure they are suitable to meet both current and future needs".
He's right – equity release isn't a decision to be taken lightly. It should be discussed fully with both an adviser and any family members who may be impacted by it, and remember that it isn't a solution for everyone. That said, for those whom it suits, equity release could be a great way to boost your standard of living in retirement or perhaps gift money to loved ones, letting you fully benefit from the wealth tied up in your home.
Considering equity release? See the types of plan available
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. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. Moneyfacts.co.uk will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.