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Equity release average rate reaches six-year high

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Rachel Springall, Press Officer
Rachel Springall, Press Officer / Finance Expert T: 01603 476210 E: Email Rachel
04/07/2022

Equity release average rate reaches six-year high

Interest rates are rising within the equity release market and the average lifetime mortgage rate has now surpassed 5.00% for the first time since 2019. It is at its highest point in six years, according to the latest analysis from Moneyfacts.co.uk.

Equity release average rate reaches six-year high

Interest rates are rising within the equity release market and the average lifetime mortgage rate has now surpassed 5.00% for the first time since 2019. It is at its highest point in six years, according to the latest analysis from Moneyfacts.co.uk.

  • Lifetime mortgage rates are rising, with the average rate breaching 5.00% for the first time since April 2019 (5.09%), when there were 187 options, and currently stands at its highest rate recorded since August 2016 (5.76%), when there were 88 options.
  • Figures from the Equity Release Council for Q1 2022 saw customers unlock £1.53 billion of property wealth in total. This was up 14% from £1.34 billion in Q4 2021 – previously the busiest quarter on record – and up 34% year-on-year from Q1 2021.
  • A majority of new customers have chosen drawdown (54%) over a lump sum option, according to the Equity Release Council.
  • Lifetime mortgage rates are rising, with the average rate breaching 5.00% for the first time since April 2019 (5.09%), when there were 187 options, and currently stands at its highest rate recorded since August 2016 (5.76%), when there were 88 options.
  • Figures from the Equity Release Council for Q1 2022 saw customers unlock £1.53 billion of property wealth in total. This was up 14% from £1.34 billion in Q4 2021 – previously the busiest quarter on record – and up 34% year-on-year from Q1 2021.
  • A majority of new customers have chosen drawdown (54%) over a lump sum option, according to the Equity Release Council.

Equity release market analysis

Lifetime equity release deals

Jul-17

Jul-20

Jul-21

Jan-22

Jun-22

Jul-22

Number of deals overall

100

463

657

661

667

631

Average rate overall (fixed and variable)

5.20%

4.27%

4.35%

4.10%

4.96%

5.63%

Source: Moneyfacts.co.uk

Equity release market analysis

Lifetime equity release deals

Jul-17

Jul-20

Jul-21

Jan-22

Jun-22

Jul-22

Number of deals overall

100

463

657

661

667

631

Average rate overall (fixed and variable)

5.20%

4.27%

4.35%

4.10%

4.96%

5.63%

Source: Moneyfacts.co.uk

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“Retirement plans could be hindered by the rising cost of living and consumers may be considering ways to plug the gap, such as by releasing wealth tied up in their home. Interest rate rises were widespread within the lifetime mortgages sector throughout June 2022. The average interest rate charged has breached 5.00% and stands at a six-year high. Choice of lifetime mortgage options has remained relatively stable since the start of the year, with around 630 deals to choose from today, but the abundance of options on offer far outweighs what was available in 2020.

“There may be various reasons why consumers decide to use equity in their home to cover costs, such as clearing debts or funding an income shortfall. According to a recent study by LV=, more than one in 10 retirees still had mortgage debt when they retired, and retirees have seen their living costs increase by £163 per month (nearly £2,000 a year). Instead of drawing income from their pension fund to cover unexpected living costs, a lifetime mortgage may be an option, but it is vital consumers seek advice to weigh up all the details before they commit.

“The cost of living crisis could hinder family members from getting onto the property ladder, and if appropriate, equity release can be a suitable option for consumers looking to pass on earlier inheritance to their children. A drawdown option may be enticing for homeowners who only need to release a little bit of wealth as and when they need it in this instance, which will also mitigate incurred interest. According to the Equity Release Council, in Q1 2022, 54% of new customers opted for drawdown lifetime mortgages.

“In the midst of rising interest rates, consumers may feel pressured to take out a lifetime mortgage, but it is imperative they seek independent financial advice to ensure it’s the right choice for both them and their relatives. Homeowners may find they can avoid pulling wealth out of their property altogether, but if it is the most appropriate choice then they must be conscious of how equity release works and its resulting impact.”

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“Retirement plans could be hindered by the rising cost of living and consumers may be considering ways to plug the gap, such as by releasing wealth tied up in their home. Interest rate rises were widespread within the lifetime mortgages sector throughout June 2022. The average interest rate charged has breached 5.00% and stands at a six-year high. Choice of lifetime mortgage options has remained relatively stable since the start of the year, with around 630 deals to choose from today, but the abundance of options on offer far outweighs what was available in 2020.

“There may be various reasons why consumers decide to use equity in their home to cover costs, such as clearing debts or funding an income shortfall. According to a recent study by LV=, more than one in 10 retirees still had mortgage debt when they retired, and retirees have seen their living costs increase by £163 per month (nearly £2,000 a year). Instead of drawing income from their pension fund to cover unexpected living costs, a lifetime mortgage may be an option, but it is vital consumers seek advice to weigh up all the details before they commit.

“The cost of living crisis could hinder family members from getting onto the property ladder, and if appropriate, equity release can be a suitable option for consumers looking to pass on earlier inheritance to their children. A drawdown option may be enticing for homeowners who only need to release a little bit of wealth as and when they need it in this instance, which will also mitigate incurred interest. According to the Equity Release Council, in Q1 2022, 54% of new customers opted for drawdown lifetime mortgages.

“In the midst of rising interest rates, consumers may feel pressured to take out a lifetime mortgage, but it is imperative they seek independent financial advice to ensure it’s the right choice for both them and their relatives. Homeowners may find they can avoid pulling wealth out of their property altogether, but if it is the most appropriate choice then they must be conscious of how equity release works and its resulting impact.”

Notes to editors

Pioneering financial comparison technology for over 30 years.

Moneyfacts Group plc is the UK’s leading provider of retail financial product data. Used by virtually every bank and building society in the UK, and supplied to the Bank of England, Financial Conduct Authority, Financial Ombudsman Service, HM Treasury, Prudential Regulatory Authority and UK Finance.

Our expert research team monitors the thousands of mortgages, savings, credit card, personal loan, business banking, life, pension and investment products in the UK.

Moneyfacts.co.uk is a financial product price comparison site, launched in 2000, which helps consumers compare thousands of financial products, including credit cards, savings, mortgages and many more. Unlike other comparison sites, Moneyfacts.co.uk shows whole of market data regardless of commercial bias, showing consumers a true picture of the best products based on the criteria they select.

We hope you find this press release insightful. We would appreciate a link back to Moneyfacts.co.uk if you decide to source this information.

For more information about us please see our key facts.

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Notes to editors

Pioneering financial comparison technology for over 30 years.

Moneyfacts Group plc is the UK’s leading provider of retail financial product data. Used by virtually every bank and building society in the UK, and supplied to the Bank of England, Financial Conduct Authority, Financial Ombudsman Service, HM Treasury, Prudential Regulatory Authority and UK Finance.

Our expert research team monitors the thousands of mortgages, savings, credit card, personal loan, business banking, life, pension and investment products in the UK.

Moneyfacts.co.uk is a financial product price comparison site, launched in 2000, which helps consumers compare thousands of financial products, including credit cards, savings, mortgages and many more. Unlike other comparison sites, Moneyfacts.co.uk shows whole of market data regardless of commercial bias, showing consumers a true picture of the best products based on the criteria they select.

We hope you find this press release insightful. We would appreciate a link back to Moneyfacts.co.uk if you decide to source this information.

For more information about us please see our key facts.

Broadcast

Our broadcast suite enables our finance experts to appear in-vision for television, and we regularly comment live on national and regional radio.

To arrange an interview for radio or television, please contact our press department. We have an in-house broadcast room.

 

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Rachel Springall Press Officer / Finance Expert
Eleanor Williams Press Officer / Finance Expert