Listen up: Equity release might not be as costly as you think!
However, without keeping up to date, you could end up spending vastly more than you need to.
The million-pound question? Is costly equity release a thing of the past?
We’ll help you explore:
- How changes in the industry will affect retirees.
- If affordable interest rates are here to stay.
- If releasing your home’s value can help you enjoy a better quality of life than you otherwise could afford.
Our team involves some of the leading experts in the field of equity release in the UK. We’ve analysed the industry over the last 20 years and have come to some conclusions regarding the trends in equity release costs.
Check these out!
Is Equity Release Becoming More Affordable Today?
The short answer is yes.
While equity release has traditionally been an expensive option for retirees compared to traditional mortgages, things have changed. In years gone by, equity release was usually only available on the open market. However, now some companies offer equity release at much more affordable rates – and with no mortgage insurance.
Equity release is an increasingly popular option for retirement funding. In a recent survey conducted by Equity Release Council (ERC1), it was found that 54% of respondents had been considering or were planning to use equity release as a means to fund their retirement.
The cost of this type of funding had been the main barrier to people’s decision-making process, with 76% complaining about how expensive it’s and 41% saying they would have considered more equity release if it were less expensive.
However, things are changing!
That sentiment has not gone unnoticed by providers, who are now trying to make equity release available at a lower price point than before. The Equity Release Council (ERC) reports that approximately 50% of firms in its network offer their customers mortgage insurance waivers which reduce fees from an average £350 per year down to just £30 or even as low as zero.
That means there may finally be some relief coming for many homeowners – particularly those with valuable properties but modest incomes.
In addition, with the industry expanding, lenders need to offer the best deals to stand out from the crowd.
Did Bexit Effect Equity Release Interest Rates?
We all know that Brexit2 shook the nation, with many citizens being vocal about opposing decisions. The UK officially left the European Union on 31 January 2020. Later on, a new partnership agreement. These rules were applied between the 2 parties as of 1 January 2021.
The question is, has Brexit affected the equity release industry?
Interestingly, as things currently stand, the equity release industry has not been affected by Brexit. A positive or negative impact is unlikely unless there’s a major economic collapse3.
The Ultimate Secret to Keeping Interest Costs Low
The main thing to remember is that you must never release more equity from your home than you need. In addition, only use your drawdown4 facility when necessary.
In addition, if you have a drawdown facility, you can save money by only unlocking what you need soon. Cash can sit in your drawdown facility, but you’ll only pay interest on the money you’ve actually withdrawn.
It’s also worth remembering that there are tax benefits if you plan how much income needs to come out now, so always speak with a professional before making any decisions.
Equity Release Rates Then & Now
Equity release interest rates have significantly dropped and have continued to do so.
While in the past, you could have paid rates around 7%, these days, they come as low as 2.3%.
It’s unclear if equity release mortgage interest rates will remain so low so now’s likely the best time to unlock the cash tied into your estate.
How to Find the Lowest Equity Release Rates?
There are several factors to consider to find the best rates – which is why you need an expert advisor or solicitor who can walk you through them.
Is It a Good Time to Release Equity?
Whether this is the best time will depend on your financial needs and whether you believe property values may rise in the future.
Are the Rates the Best They've Ever Been?
The rates are certainly much lower than they have been in the past – but this is also due to several other factors such as increased competition and market volatility.
How Can I Make Sure I Have the Best Deal?
There are several questions to ask to find the right equity release product for your needs, and these include how much you want to borrow, what types of terms will suit your circumstances as well, as whether you’re happy with rates or would prefer an interest-only mortgage.
It’s also important that if you have an adviser or solicitor, they recommend the best type of protection for your family. There can be no mistakes made when transferring property deeds and other paperwork between parties.
The future is looking bright for equity release. With new products, lower interest rates, and better affordability guidelines in place, the days of expensive equity releases are finally over.
If you’ve been struggling to afford your home or pay off a mortgage with an older age-related illness that won’t let up, then it may be time to consider equity release.
In addition, take a look at the equity release alternatives for inspiration. You can also see how much cash is tied into your home by using our FREE equity release mortgage calculator. You’ll receive instant results in just 8 seconds.
What are you waiting for?