Rates begin to rise at half of lifetime mortgage lenders

Aviva, Hodge Lifetime, Just, LV=, Legal & General and Vernon Building Society are all beginning to increase their equity release rates, meaning that the average lifetime rate has risen from a record low of 5.03% in July to 5.10% this month.

The average rate for mortgages ranging up to 50% LTV has risen from 4.67% to 4.83% over the same period.

Additionally, the number of deals available on the market has dipped from 157 to 128 over the quarter.

Rachel Springall, finance expert at Moneyfacts, said: “The equity release market has listened to the consumer demand for more flexibility, and, as a result, lifetime mortgages are becoming more popular, so much so, that record amounts are being unlocked through equity release.

“This year has also seen an influx of competitive rates, with the average lifetime mortgage recording its lowest ever level in July (5.03%). However, lenders are now starting to factor in interest rate rises, with six out of 11 providers upping their rates over the last quarter, some more than once, meaning the average rate now stands at 5.10%.

“Beyond the rates, lifetime mortgages may well be attractive to those who had considered downsizing, but are looking to avoid the hassle of moving and the costs involved, such as paying stamp duty. It is little wonder then that 82% of the lifetime mortgage market provide a free valuation. There are now more deals without a product fee too, however these deals still account for less than half the market share (41%).

“It’s encouraging to see the market adapt to create more flexible products, such as those that provide a drawdown option to suit those looking to draw cash as and when they need it rather than take a large upfront lump sum. It’s easy to see why this option would be popular, as more traditionally, any remainder of a lump sum could well have been stashed in a basic savings account for later withdrawal."