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Equity release average rate rises up from record lows

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Rachel Springall, Press Officer
Rachel Springall, Press Officer / Finance Expert T: 01603 476210 E: Email Rachel
01/03/2022

Equity release average rate rises up from record lows

Consumers looking to release equity out of their home will find rates are rising on lifetime mortgages, according to the latest analysis from Moneyfacts.co.uk. Since the start of 2022 every lender in this space, except for OneFamily, has increased their rates. Equity release lending hit a new record in 2021, during a period when the average equity release rate reached a record-low and concerns grew over rising living costs.

 

  • Lifetime mortgage rates have risen since the start of 2022, now 4.33%, the highest average rate seen this year, notably higher than March 2021 when it stood at a record low of 3.86%.
  • Figures from the Equity Release Council show total lending in 2021 climbed 24% year-on-year to £4.8 billion, up from £3.86 billion in 2020. The 2021 figure has surpassed the previous record, set in 2018, of £3.94 billion.
  • The maximum loan-to-value (LTV) available across the market stands at 51%, compared to 48% a year ago, and 48% two years ago.

Equity release average rate rises up from record lows

Consumers looking to release equity out of their home will find rates are rising on lifetime mortgages, according to the latest analysis from Moneyfacts.co.uk. Since the start of 2022 every lender in this space, except for OneFamily, has increased their rates. Equity release lending hit a new record in 2021, during a period when the average equity release rate reached a record-low and concerns grew over rising living costs.

 

  • Lifetime mortgage rates have risen since the start of 2022, now 4.33%, the highest average rate seen this year, notably higher than March 2021 when it stood at a record low of 3.86%.
  • Figures from the Equity Release Council show total lending in 2021 climbed 24% year-on-year to £4.8 billion, up from £3.86 billion in 2020. The 2021 figure has surpassed the previous record, set in 2018, of £3.94 billion.
  • The maximum loan-to-value (LTV) available across the market stands at 51%, compared to 48% a year ago, and 48% two years ago.

 

Equity release market analysis

Lifetime equity release deals

Mar-17

Mar-20

Mar-21

Jan-22

Mar-22

Number of deals overall

96

406

492

661

665

Average rate overall (fixed and variable)

5.25%

4.20%

3.86%

4.10%

4.33%

Average max LTV

49%

48%

48%

51%

51%

Source: Moneyfacts.co.uk

 

 

Equity release market analysis

Lifetime equity release deals

Mar-17

Mar-20

Mar-21

Jan-22

Mar-22

Number of deals overall

96

406

492

661

665

Average rate overall (fixed and variable)

5.25%

4.20%

3.86%

4.10%

4.33%

Average max LTV

49%

48%

48%

51%

51%

Source: Moneyfacts.co.uk

 

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

“Consumers may wish to use the wealth locked up in their home as a way of funding retirement, or even to ease the rising cost of living this year. The equity release market boomed in 2021, during a time of record-low rates in the sector and rising house prices, records show total lending reached a three-year high of £4.8 billion. However, interest rates charged on lifetime mortgages are rising this year, and this means unlocking equity out of a home may now be at a higher cost than if someone locked into a deal last year. Indeed, in March 2021 the average equity release rate hit a record-low of 3.86% but has since risen to 4.33%.

“Equity release can be a suitable option for consumers looking to pass on earlier inheritance to their children, perhaps to help them get onto the property ladder in the midst of rising house prices, concerns over the rising living costs, and higher mortgage interest rates. Plugging the pension gap may also be an option for those approaching retirement and, according to Canada Life, 30% of the over-55s with defined contribution pensions intend to release equity from their home to help fund retirement.

“Growing demand for equity release has encouraged lenders to adapt their range to suit an array of different circumstances. There are currently over 600 different lifetime mortgage options available to consumers, so navigating these could be a difficult process without advice. Consumers may be unsure whether to take a lump sum or drawdown, however, the latter may prove popular for those only looking to release wealth as and when they need it most to mitigate incurred interest. According to the Equity Release Council, during Q4 2021, 61% of new customers opted for drawdown lifetime mortgages, the highest percentage of the year and up from 59% in Q4 2020.

“Seeking advice from an independent broker is not only wise to assess all the options out there, but also to ensure it’s the right choice for both the homeowner and their relatives. Taking a lifetime mortgage will impact inheritance and while some homeowners may feel pressured to make a decision amid rising interest rates and living costs, careful thought and planning is a must before they make any arrangement.”

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

“Consumers may wish to use the wealth locked up in their home as a way of funding retirement, or even to ease the rising cost of living this year. The equity release market boomed in 2021, during a time of record-low rates in the sector and rising house prices, records show total lending reached a three-year high of £4.8 billion. However, interest rates charged on lifetime mortgages are rising this year, and this means unlocking equity out of a home may now be at a higher cost than if someone locked into a deal last year. Indeed, in March 2021 the average equity release rate hit a record-low of 3.86% but has since risen to 4.33%.

“Equity release can be a suitable option for consumers looking to pass on earlier inheritance to their children, perhaps to help them get onto the property ladder in the midst of rising house prices, concerns over the rising living costs, and higher mortgage interest rates. Plugging the pension gap may also be an option for those approaching retirement and, according to Canada Life, 30% of the over-55s with defined contribution pensions intend to release equity from their home to help fund retirement.

“Growing demand for equity release has encouraged lenders to adapt their range to suit an array of different circumstances. There are currently over 600 different lifetime mortgage options available to consumers, so navigating these could be a difficult process without advice. Consumers may be unsure whether to take a lump sum or drawdown, however, the latter may prove popular for those only looking to release wealth as and when they need it most to mitigate incurred interest. According to the Equity Release Council, during Q4 2021, 61% of new customers opted for drawdown lifetime mortgages, the highest percentage of the year and up from 59% in Q4 2020.

“Seeking advice from an independent broker is not only wise to assess all the options out there, but also to ensure it’s the right choice for both the homeowner and their relatives. Taking a lifetime mortgage will impact inheritance and while some homeowners may feel pressured to make a decision amid rising interest rates and living costs, careful thought and planning is a must before they make any arrangement.”

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.

 

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