Should You Take Equity Release Now | moneyfacts.co.uk

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Derin Clark

Derin Clark

Online Reporter
Published: 08/07/2021

Over the last five years equity release rates have consistently fallen and last month borrowers with a minimum 30% loan-to-value (LTV) could get rates from as low as 3.03%. As rates are so low at the moment, it makes it a tempting time for homeowners looking to unlock some money built up within their homes through equity release. Homeowners considering this, however, should carefully consider all their options before taking equity release and speak to an independent financial adviser before making a decision.

Falling equity release rates

The last five years has seen a significant increase in competition within the equity release market, which has resulted in borrowers having a lot more products to choose from. Not only has this helped reduce equity release rates but has also increased the flexibility offered on many deals. For example, it is now common for equity release products to allow drawdown, which means that borrowers only start accumulating interest on the amount of money that has been withdrawn, rather than having to take the whole amount in a lump sum. As well as this, some products now allow partial repayments or interest to be made.

Although equity release products have become more flexible and the lower rates have made borrowing cheaper, those considering equity release should be aware that interest still accumulates on money borrowed. This means if someone in their 60s takes equity release by the time their house is sold, the equity release has accumulated a significant amount of interest that massively impacts the inheritance they leave behind.

Is now a good time to take equity release?

Falling equity release rates and the increase in flexible features within deals means that equity release deals are much more attractive to borrowers than just a few years ago. As well as this, 2021 has seen house prices continue to rise and last month seeing the average house price reach a record high. Although the latest Halifax House Price Index found that month-on-month average house prices have fallen slightly by 0.5%, in July the average house price stood at £260,358, resulting in homeowners likely having more equity to unlock from their homes through equity release.

Although market conditions make equity release highly tempting at the moment, borrowers considering this option should keep in mind the long-term impact equity release has on finances. As well as this, those considering equity release should discuss their thoughts with an independent financial adviser who will be able to assess their personal situation and suggest alternative options available.

How to get a free financial consultation

If you have £100,000 or more in investments and savings you can get a free one hour consultation with our preferred independent financial advisers Kellands. You can find out more or book your free consultation here.

Homeowners who took out an equity release product five years ago or more may, however, find that now could be a good time to switch equity release deals. The fall in rates and increase in deals over the last five years means that by switching deals they could reduce the interest accruing on their loan, or they may even be in the position to start making partial repayments or interest payments. Those considering switching equity release deals will need to look at their current plan and determine if costs involved in switching deals will be worth the potential savings and it may be worthwhile speaking to an equity release broker, such as HUB Financial Solutions, to discuss the options available.

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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