Equity release rates hit six-year high
Average rates in July were recorded at 5.63%, up from 4.96% in June, according to data from Moneyfacts.
And it comes as the number of lifetime mortgage products on the market dip to 631 from the 667 available last month.
The current average rate is just below the 5.76 per cent peak seen in August 2016 when there were 88 lifetime mortgage options. July’s rate is also up on April 2019’s average of 5.09%, the last time equity release rates exceeded 5% and there were 187 products on the market.
Compared to last year, average lifetime mortgages rates are up on 4.35% while product availability is down on the 657 deals on the market at the time.
The later life mortgage market has seen significant growth recently, with borrowers releasing £1.53bn of property wealth in Q1 2022, according to the Equity Release Council. This marked the busiest quarter on record for the sector.
Rachel Springall, finance expert at Moneyfacts, 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.
“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.”
She added: “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.”