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Equity release rates cut as lenders improve offers

by | Nov 27, 2023

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The equity release market has seen lenders cut rates since the start of this month, according to the latest analysis from Moneyfactscompare.co.uk.

  • Lifetime mortgage rates are falling, with the average rate reaching 7.13% since the start of this month, down from 7.33%. At the start of November 2022, the average rate stood at 8.13%, its highest on Moneyfacts’ records (electronic records began in November 2007). The choice of deals stands at 312, a far greater number than at the start of this year (January 2023 – 179).
  • Several lenders have cut rates in their ranges since the start of November 2023. In terms of options, Legal & General Home Finance has over 80 deals available in its range.
  • Figures from the Equity Release Council for Q3 2023 saw customers unlock £716 million of property wealth in total, the busiest quarter of 2023 so far for lending. This was up 8% from £663 million in Q2 2023.
  • A majority of new customers have chosen drawdown (53%) over a lump sum option, according to the Equity Release Council.

Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said: “A lifetime mortgage could be an option for borrowers to use some wealth from their home to support their retirement plans or help towards the cost of living. Those weighing up their options may be pleased to find that lenders have been making rate reductions this month, and that the choice of deals is resilient. The choice of lifetime mortgages has been relatively stable over recent months, but there has been encouraging growth compared to the start of this year. 

“According to a recent report from the Equity Release Council, Q3 2023 was the busiest quarter so far this year for lending. The report also revealed that 53% of new customers opted for drawdown lifetime mortgages during the same quarter. As interest rates have been volatile year-on-year, it’s not too surprising to see a slight preference for this option versus taking a lump sum, particularly as the average equity release rate stood at a record high of 8.13% in November 2022. A drawdown option may be more enticing for homeowners who only need to release a small portion of wealth when they need, which will mitigate incurred interest. 

“Borrowers who are considering an equity release plan would be wise to seek independent financial advice to navigate the abundance of deals and choose the right one that suits their circumstances. Lifetime mortgages have several important factors to consider, such as associated fees, drawdown and, of course, the impact on passing inheritance to family members. Hopefully, we will see continued resilience in the market and more rate cuts as the year-end approaches for those looking to take out a lifetime mortgage.”

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