Copy article

Equity Release rates improve to help older borowers

Journalist: Justin Moy, Contributing Editor

ended 15. December 2023

We have seen a number of rate reductions to the Equity Release products from Legal & General, More2Life, and Canada Life to mention a few. Headline rate of 5.7% from L&G on their cheapest product option makes the opportunity of Equity Release more paletable for both borrower and adviser.

There have also been improvements to other RIO products from L&G and Livemore, and the new Payment Term Lifetime Mortgage product form L&G too.

Is this the moment the Equity Release market is about to wake up and become a more viable option again? Will we see continued rate cuts in line with the residential mortgage market? Are the lenders looking to build more innovative products to give borrowers new options to borrow in later life?

Your comments, observations and thoughts for innovation are very welcome.

9 responses from the Newspage community

Copy all

Copy

Editor
Justin Moy
Managing Director at EHF Mortgages
It's great to see some of the major equity release lenders following the trend of the residential mortgage market, as better rates have a significant influence on products that have any element of retained interest built in. It also allows the lender to increase the level of borrowing, too. Most provide the opportunity to change rates throughout the application and offer stages, should there be further improvement too. We have seen those borrowers with regular mortgages be more accepting of this higher rate environment, and this is starting to happen within equity release. That should give more confidence to lenders to bring new ideas to the market next year.
Copy

Editor
Darryl Dhoffer
Founder at The Mortgage Geezer
I think it is too early to say whether we will see a sustained revival in the equity release market. However, there are still several homeowners with significant equity in their homes, which is continuing to rise, and an ageing population will drive demand for these products. Lenders are responding by developing new and innovative products. Rate reductions are a big plus as well, however, we know how quickly this market can change. But for the moment the defibrillators are out and the market is back to life.
Copy

Editor
Simon Bridgland
Director at Charwin Private Clients
Improvements in later life products have been needed for some time, rates are one thing which many of the new breed of end user are very conscious of. Many of them enter the later life sector with reluctance and so are naturally comparing rates with traditional mortgage offerings. Currently, I feel rate reductions will win any war in the later life sector.
True product innovation is showing signs of happening and the new Payment Term range from L&G is a good step in the right direction. I still think they could do more, especially on the loan to value for younger applicants. Mandatory payments until age 75 will naturally keep equity in the property, so why not go one step further and have a true capital and interest option to allow for an even greater loan to value in the first place, again with mandatory payments until retirement or age 75.
Those stuck with interest-only loans ending, many with 45%+ LTV are still being left high and dry without many options and needing to sell.
Copy

Rowan Frayling
Managing Director at J Finance
Having been quite severely affected by both increased rates and decreased loan sizes available, this is great news for the later-life lending market.

Unlike most conventional mortgage lenders, the product innovation we see in this sector only adds to its reputation and its application in everyday advice for our clients. This end of the market certainly doesn't rest on its laurels.
Copy

Wayne Dewsbury
Relationship Manager at UK Moneyman
Clearly these rate reductions are positive moves, as any potential customers who may have been “sitting on their hands” until rates began to come down, may now decide the time is right to take action. One word of caution on the hybrid products - innovative though they undoubtedly are - is that they may focus the attention of borrowers at the younger end of the “later life” spectrum onto Equity Release, when there may potentially be other, more traditional products, still available, but this just underlines the value of speaking to advisors who can cover ALL the potential options rather than just a specific section of the market.
Copy

Gary Bush
Financial Adviser at MortgageShop.com
Happy to see rate tweaks from the Equity Release providers, it's been a difficult time to draw a real comparison during the mortgage rate crisis this year. Must say I would have thought that these providers would have been insulated from the market disruption over the last year or so - sadly they appear to have been one of the first to run for the hills, in pricing themselves out. The UK needs more out-of-the-box thinking in the later-life lending space and Equity Release is a valid option in some circumstances, it's all about a bespoke advice approach to analyse each applicant's circumstances. If providers continue to reprice, in line with mainstream products, 2024 could see a good uptick in Equity Release.
Copy

Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
The recent reductions in rates have helped older borrowers with lifetime mortgages and retirement-interest-only (RIO) mortgages, especially given that the interest-only nature of the vast bulk of these loans means that interest rate changes have a more pronounced impact on the costs. Older borrowers have also been assisted by more and more mainstream lenders extending the age at which they will run standard mortgages, giving many the option of looking at a normal mortgage alongside their lifetime and RIO choices.
Copy

Stuart Powell
Managing Director at Advice Guru
Christmas has come early for those needing to release money from their home. The pent-up demand created by high interest rates and loan to values in 2023 may be consigned to history.
Interest rates starting with a four may be the eventual outcome of an improving market.
Homeowners over the age of 55 should consider one of their New Years Resolutions to be to review their Savings, Investment and Property wealth to ensure they are in the right place for 2024.
Copy

Matthew Taylor
Director at Equilaw
It is great to see some equity release lenders react quickly and cut some of the headline interest rates. This can only be good for stimulating interest and activity in the later life lending space. If the compression of LTVs also starts to unwind as we move into 2024, I can see there being a flurry of activity as homeowners begin to consider equity release as an attractive solution to their financing needs. This, combined with continued innovation in the product space, should mean those over 55 have a more flexible and tailored landscape of lending options that better fit their needs. The signs are positive that the equity release market is ready to return from 18 months of cold hibernation.