How to remortgage equity release and save money | moneyfacts.co.uk

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Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 16/06/2020

Those who have borrowed money using equity release may find that an equity release remortgage could now significantly reduce the cost of this debt and help to protect the value of their property as part of their estate.


Borrowers can reduce the interest cost of their lifetime mortgage (the most common type of equity release) because their interest rates have been steadily declining for many years. The average fixed rate for equity release has dropped from 7% 10 years ago, to below 5% in July 2019 and now sits at 4.27% today. Our latest data shows that one of the lowest fixed rates available for equity release is 2.6% APR for the lifetime of the loan. This is compared to a standard five-year fixed rate remortgage, where the lowest rate is currently 2.8% APRC.

Equity release remortgage saves £20,000 in interest costs

Paul MacDuff, director of equity release advisers MCB Financial Services, explains how borrowers could save substantial sums in interest costs by switching their equity release mortgage to a new lender or product.


“My client had taken out £35,000 using a lifetime mortgage in 2015 and a further drawdown of £8,000 in 2017. Their current interest rate was 6.24% per annum, whereas they could now qualify for a lower rate of 2.94%. The total outstanding balance was £55,000 and included an early repayment charge (ERC) from the lender. Switching to the lower rate including the ERC would save the borrower £20,370 in lower interest costs over 10 years. “

Protect the value of your estate

Equity release has continued to be a popular source of retirement income, with lending in quarter-one 2020 reaching £1.06bn compared to £936m in the same quarter 2019. Many borrowers have chosen to use equity release to fund their retirement due to lower interest rates and the rules that allow pensions to be inherited by their loved ones without incurring Inheritance Income Tax. Those who already have a lifetime mortgage can protect the value of their estate by reducing the cost of the debt, a remortgage to a lower rate reduces their interest costs, and thereby reduces the amount of debt that needs to be repaid after their death.

Find out how much money you could release from your home

Equity release adapts to lockdown changes

Lockdown is expected to reduce the value of equity release loans due to restrictions on house valuations and the inability to receive face-to-face advice. Equity release lenders have responded by offering automated valuations (AVMs), and brokers have adjusted to providing advice by telephone and video conference to meet with social distancing requirements. These changes have meant borrowers can continue to access equity release, whether it’s for the first time or to reduce the cost of their existing equity release borrowing.

Note

The Equity Release Service is provided by HUB Financial Solutions Limited. HUB Financial Solutions Limited. Registered office: Enterprise House, Bancroft Road, Reigate, Surrey RH2 7RP. Registered in England and Wales no. 05125701. HUB Financial Solutions Limited is authorised and regulated by the Financial Conduct Authority. Part of Just Group plc. Moneyfacts.co.uk itself is not authorised by the Financial Conduct Authority for equity release business, so we refer our customers to HUB Financial Solutions’ regulated service.

Any legal or contractual relationship will be with HUB Financial Solutions. There may be a fee for mortgage advice. Your adviser consultation appointment is FREE and carries no obligation. If you choose to proceed with a recommended product, an advice fee of £1,100 would be payable upon completion. Moneyfacts.co.uk will receive a  commission from the lender. HUB Financial Solutions does not offer advice on investments.

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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. 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.

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