Equity release product choice doubles as average rate falls below 5%: ERC

A total of £1.85bn in housing wealth was unlocked in H1 and the range of product options increased two-fold compared to this time last year to almost 300 options.

Product options offering the ability to make regular interest payments increased to 81 in August 2019, up 80% since the start of the year and almost quadrupling year-on-year.

There has also been a notable annual rise in product options available on sheltered and/or age restricted accommodation (269%), while the range of options offering downsizing protection have doubled. This feature allows customers to downsize and repay their loan without incurring an early repayment charge.

Products offering inheritance guarantees have seen an 88% year-on-year increase.

The report also shows the average equity release rate has fallen to a record low of 4.91%. Over half (58%) of products offer a rate of 5% or less, while a fifth (21%) of products are priced at 4% or below – with these rates being fixed or capped at a maximum limit for the entire life of the loan.

David Burrowes, chairman of the Equity Release Council, commented: “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. A broader range of products means equity release can play an important part of advisers’ toolkit when considering clients’ requirements in later life. It’s vital that advisers across a host of areas – including pensions and wealth management – can identify when equity release may or may not be suitable based on today’s product range and can refer a client for specialist advice where appropriate.

“The market’s development has been driven by competition, reinforced by robust consumer protections and product safeguards. As the UK’s ageing population continues to grow, making use of housing wealth will be essential to help all generations meet the financial challenges they’re facing both today and tomorrow.”