After a year of strong competition, the equity release market has seen the average lifetime mortgage rate increase and the number of deals fall over the last month, as the market feels the impact of the Coronavirus pandemic.
Our research found that during April over two-thirds of lifetime mortgage lenders increased rates on selected deals, with the average equity release rate for fixed and variable deals now standing at 4.34%, up from 4.23% a month ago and 4.20% in March.
In addition to this, we found that the choice of deals on the market has fallen to 357 this month, largely due to Pure Retirement condensing its range of options by 60. While the overall month-on-month fall of 66 deals may be a sign of things to come, today there are still 159 more deals available to consumers compared to a year ago when there were just 198 options available and the average rate stood at 5.00%.
Equity release market analysis
| Lifetime equity release deals |
May 2019 |
Mar 2020 |
Apr 2020 |
May 2020* |
| Number of deals overall |
198 |
406 |
423 |
357 |
| Average rate overall (fixed and variable) |
5.00% |
4.20% |
4.23% |
4.34% |
| Average max LTV % |
47% |
48% |
48% |
49% |
Commenting on the research, Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Borrowers may well turn to an equity release deal if they feel equity rich but cash poor, are looking to reduce their inheritance tax bill, or to fund the cost of care if they have little to no disposable income or savings. Consumers need to decide whether a lifetime mortgage is the right choice for them and, despite over two-thirds of lenders in the market increasing rates, it is vital that borrowers do not rush into a decision and ensure they get the right advice first.
“At first glance, a drop in the number of equity release deals month-on-month may seem concerning, but it is worth pointing out that most lenders in the lifetime mortgage market are still offering an abundance of choice. If more lenders consolidate their range though, then this could be more of a sign of restructuring their options to a target market. One area for consumers and advisers to monitor is the maximum loan-to-value bands, as these could tighten, however month-on-month there has thankfully been little change.
“The equity release market has had a buoyant start to the year. Indeed, according to the Equity Release Council, during the first quarter of 2020 the number of new plans taken out hit 11,079, the most seen in any Q1 period. In fact, £1.06bn of property wealth was accessed via equity release products, up by 14% from £936m a year earlier. As the year progresses, it will be interesting to see how this activity may adapt to the ongoing influences of the Coronavirus pandemic.
“If borrowers are still sitting on the fence on whether to take out a lifetime mortgage, then they would be wise to set up a phone call or video call with their financial adviser to go through their options during the lockdown if they have the time to spare. However, it is also important to discuss the implications with their family on how such an arrangement can impact their inheritance.”
*Calculations for May 2020 are based on providers’ current standard product data sets but, as a result of the Coronavirus emergency, criteria restrictions may apply or providers may offer additional temporary products in respect of desktop or semi-automated valuations.
