Interest rates fall as equity release used to manage debt and help out family

Rebecca Kirk - Market Research Assistant

Published on September 4th 2019

Welcome to the first of Pure Retirement’s new series of regular blog posts taking a look at the trends in the equity release market. As a later life lender solely providing lifetime mortgages, we are an expert in equity release and keep a close eye on the evolving market.

As the equity release market continues to grow, not only is the number of products available increasing but the competition between lenders means that we have seen interest rates fall considerably over the last year in line with the drop in GILT rates. The landscape of the equity release market has altered significantly in recent years and the average interest rate is 4.99% compared to 6.11% five years ago, and at the start of this year the range of products on the market was double the number available in January 2018. These changes are noteworthy for both current and new equity release customers as lifetime mortgages will be accessible to more people and at a lower potential cost.

As equity release becomes an increasingly popular financial choice in later life, there are certain trends emerging amongst the diverse reasons for choosing a lifetime mortgage. Research has pointed to clearing existing mortgages or unsecured debt as a top reason for customers to release equity from their homes. In the ever changing economic and political climate, customers are utilising the funds held in their property to put themselves on a more secure financial footing. Managing debt when at, or approaching, retirement can be difficult and we are seeing customers accessing financial assets held in property to help with this.

There is also evidence of changing attitudes towards intergenerational wealth and inheritance. The older generation are the most likely to own their homes, and The Centre for Ageing Better found that the highest average personal wealth is in the 55-64 age group. As a result of rising house prices over the last few decades, £382 billion of equity is now available in the value of homes owned by over 55s, which provides this generation with greater financial security than most millennials. Surveys have shown that those in later life are increasingly responding to this inequality between generations by choosing to pass inheritance wealth to their grandchildren who need the financial support, and lifetime mortgages are one way to provide such a living inheritance.

Trends of how customers are using equity release show a wide range of plans and needs, and product ranges are evolving to meet these customer demands as the market continues to grow. We’ll be exploring lifetime mortgage customer and product trends further in future blog posts, so stay tuned for more articles throughout the rest of 2019 and beyond.

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