Equity Release

How Equity Release has evolved

Matthew Barrand VAT

What has changed in the Equity Release market?

Consumer interest in the later life lending sector has been steadily increasing over the past 10 years, with more than 19,000 plans taken out in the first half of 2020 compared to just over 10,000 in the first half of 2010, according to data from Key.

How has lending on Equity Release changed?

Mortgage rates have come down rather drastically, compared to the early days of Equity Release, where lenders are now offering long-term interest rates in the region of 2% to 4%, depending on the borrower’s situation.

We are speaking to many clients who have older arrangements in place and are conducting a review of their plans and situation to establish if we could secure a lower rate of interest, and in some cases, we can.

Likewise, some arrangements are set up on an interest-only basis, so a lower rate of interest would give rise to a lower monthly repayment, which would of course help an individual’s cash-flow.

What options can borrowers get with Drawdown products?

In recent times, Equity Release arrangements with a Drawdown facility have become a popular feature. In fact, Drawdown Lifetime Mortgages continue to be the most popular product type, taken out by 56 % of new customers in the first half of 2020, according to figures from the Equity Release Council.

A Drawdown facility gives the borrower the choice and flexibility to draw further (pre-agreed) funds when they require. Interest is only charged once the facility is used and funds are drawn. This means borrowers do not have to draw large amounts they do not require.

Can Equity Release help to fix the care crisis?

Equity Release is emerging as a solution to the care crisis to assist the aging population. This has been brought even more to the fore, as a result of the coronavirus crisis, which has shown how important the people who work in residential care homes and provide care at home are.

This is a lifetime mortgage.

To understand the features and risks, ask for a personalised illustration.

If you would like to discuss any area of Equity Release or have any questions, please get in touch with us.