Equity Release

Equity release lending flat, as interest rates fall

Christina Hoghton
Written By:
Christina Hoghton

Older borrowers have plenty of choice, but financial and legal advice is important

The equity release sector was flat in the first half of 2019, but consumers benefitted from unprecedented product choice, according to the Equity Release Council.

The trade body for later life lending released its Autumn 2019 Equity Release Market Report which showed that £1.85bn in housing wealth was unlocked in the first half of 2019 by homeowners aged 55+.

This was almost unchanged from the £1.84bn recorded over the same period in 2018. However, there was a small – 6% – rise in the number of plans taken out.

Mark Gregory, founder and CEO of Equity Release Supermarket, which bucked the trend with a significant  17% rise in lending over the same period, said: “The growth we have seen in the equity release market in recent years has clearly not continued in the first half of 2019. The reasons for this are complex and include economic uncertainty impacting regional house prices – particularly in London.

“The market isn’t flat due to a shortage of customer interest – our figures prove that. What we are seeing is a slowdown from the two dominant players within the equity release brokerage market, causing a knock-on effect and impacting the wider market.”

More choice

Borrowers are benefitting from more later life borrowing options with the biggest product growth areas over the last year including sheltered or age-restricted accommodation, making regular interest payments, downsizing protection, inheritance guarantees and drawdown facilities. Consumers now have an unprecedented choice of 300 products.

The Equity Release Council said the ‘market has continued to develop and mature in recent years, energised by strong competition in the market and underpinned by robust consumer safeguards’.

Gregory added: “Lifetime mortgages offer a number of features that make them an attractive borrowing option. The money released is tax-free, there are no credit or affordability checks to pass and lifetime mortgage balances can be effectively managed or reduced through combining an interest-only plan with the voluntary payment feature.”

Lower rates

The average equity release lifetime mortgage rate fell below 5% for the first time to 4.91% in July 2019.

David Burrowes, chairman of the Equity Release Council, said: “The equity release market is responding to consumer demand as it continues to evolve and grow. Increased product innovation and flexibilities are helping to meet wide range of financial and social needs, from providing extra retirement income to passing on wealth to younger generations.

“Older homeowners considering equity release have never before had more choice and flexibility to meet their changing needs and their families’, with average rates also at record lows.”