Equity release rates at a record low

Homeowners looking to release equity from their home through a lifetime mortgage will be pleased with new research showing that rates are at a record low and the choice of products at an all-time high.

The research, which was carried out by Moneyfacts.co.uk, found that the average rate across all lifetime mortgages, also known as equity release, stands at 3.95%, the lowest it has been since Moneyfacts records began. In addition to this, the number of deals currently stands at an all-time high of 488.

Commenting on the figures, Rachel Springall, finance expert at Moneyfacts.co.uk, said: “The equity release market has started this year awash with rate cuts and prospective borrowers looking to release wealth out of their home will find that the interest charged, on average, has now fallen to a record low. Indeed, the average lifetime mortgage rate has fallen below 4% for the first time ever, showing that lenders are keen to meet demand, with some repricing their range multiple times over the past four weeks.”

Indeed, year-on-year the number of lifetime mortgage deals has increased by 83, from 405 available in February 2020 to 488 today. As well as this, homeowners looking to release equity from their home two years ago would have had just 204 deals to choose from in February 2019.

At the same time, lenders have been cutting the rates on their lifetime mortgages. Back in February 2019, the average lifetime mortgage rate was 5.20%, a year later in February 2020 this had fallen to 4.49% and today stands at its record low of 3.95%.

Springall added: “The impact of the Coronavirus pandemic on the lives of consumers may have spurred some to seriously consider a lifetime mortgage, either to help fund their retirement or even to provide an early inheritance for their family members who may be struggling. Now that there are more options on the market than ever seen before, it is essential to seek qualified advice to compare deals and explain the workings.”

Homeowners considering a lifetime mortgage can get an idea of what type of rates are available on deals by reading our round-up of the best lifetime mortgage rates during January 2021.

Although a lifetime mortgage can be a good way to release equity from their home, this option is not the best choice for all homeowners. For example, the type of lifetime mortgage deal and rate that is offered will depend on a range of factors such as the value of the home, as well as the age of the borrower. To find out how much equity can be unlocked from a home, use HUB Financial Solutions' how much can you release from your home calculator.

In addition to this, those considering a lifetime mortgage should be aware that it can have a long-term impact on their finances. For example, although the lifetime mortgage does not have to be repaid during the borrower’s lifetime, unless they move into permanent care, it can impact the inheritance they leave behind. As such, those considering this option should get advice from an independent financial adviser to ensure it is the right option for their financial goals. For more information about how lifetime mortgages work, read our guide on equity release.