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Rising equity release rates

Journalist: Rachel Mortimer, The Times

ended 04. July 2022

On the hunt for quick comments on rising equity release interest rates. Data from analyst Moneyfacts shows the average equity release rate has risen to 5.63pc in July, a six-year  high. It's up from 4.96pc in June and 4.1pc in January of this year. It comes at a time when more homeowners are looking for extra funds amid the cost of living crisis. 

Will this make equity release unaffordable for some? Should borrowers of this age think carefully if rates are rising? Will the impact of rising rates be different for older borrowers than younger? 

Any help greatly appreciated! Thank you. 

4 responses from the Newspage community

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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
We are already seeing clients having second thoughts about their plans for using equity release to raise finance. Although ER is a lifetime commitment and affordability is necessity considered, lots of clients do want to ensure some sort of legacy is available for family members and higher rates will erode this. It’s still a great tool for the right clients, but difficult conversations are becoming more common.
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Samantha Bickford
Mortgage and Equity Release Specialist at Mortgages with Clarity
Whilst interest rates are rising across the whole of the mortgage market, it is important to remember the huge gap between interest rates on historic equity release plans as high as 8% and the average rate we are seeing now at 5.63%. This means now is a key time for those on the higher interest rate lifetime mortgage plans to remortgage to a lower interest rate deal, to benefit from the savings made on the interest charged for the remaining term, for borrowers and their estate. Seeking advice from an independent and whole of market broker is essential to review all the mortgage options available, but also to ensure it's the best option for both the homeowner and their relatives.
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Paul Neal
Mortgages & Equity Release Advisor at First Choice Financial Services
Rates have risen across the board to it makes sense that equity release rates will follow suit, however equity release still remains a great prospoect with the rise in cost of living, it can be used to help suppliment your income through retirement and rates are much better than historically. Equity release can if done right be a cost effective way of releasing income tied up in your home.
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Stuart Powell
Managing Director at Advice Guru
Equity Release rates have been rising for the last 18 months. Gone are the 2.30% Fixed for Life deals of early 2021. They have been replaced by deals which are all over 4%. My prediction is that there will be no Equity Release interest rates available under 5% by the end of 2022. It isn't all doom and gloom however, firstly due to the type of clients looking to release equity and secondly due to the superb improvements in the features of products over the last five years. Clients decisions are usually driven by need or want. Those that need ER usually have a mortgage at the end of its term and have decided not to downsize. Their choice is give their home back to the lender, or take an interest rate a couple of percent higher than last year (but still at a historically low rate). Those who want to improve their home, travel more, gift to family are generally not that bothered by the interest rate. People have had a really tough few years isolated from fun and family so are using property wealth to their advantage. Product innovations mean that the interest (and even capital) on Equity Release loans can be repaid so the compounding of interest need not happen. Equity Release fills a real void in homeowner over 55s financial planning and provided they choose an Equity Release Council accredited advisor and search fro ione on sites like unbiased.co.uk, they can find out all they need to know before moaking an important decsion.