Average rates for equity release products hit record lows as the choice of products grows
Later life finance expert David Forsdyke unpicks the latest equity release market data and considers the options available for consumers interested in accessing their property wealth
The cost of equity release products continued to fall between April and June as the choice of products available to consumers proliferated.
Average rates across the market dropped to 4.11% in July, according to the Equity Release Council (ERC) and Knight Frank Finance clients are securing rates close to 3% and at times even lower. Meanwhile the number of products available has climbed by almost a third in the past twelve months.
That provides solid foundations for growth over the coming year following a dip in activity during an unprecedented few months. Our Equity Release Survey, published this month, revealed that awareness of equity release products is growing and perceptions are improving through younger generations.
One fifth of our respondents said they are willing to take a pro-active approach to accessing their property wealth in the future, should they need it. We are also increasingly seeing homeowners incorporate property wealth into their financial planning, so we expect the equity release market to return to the long-term growth trend over the medium-term.
The ERC data revealed the number of new plans agreed during Q2 was down 14% on the same period last year, which was to be expected amid so much uncertainty. Many older home owners have chosen to take stock and see how the long-term outlook for the pandemic and the economy develops before altering or pushing on with their long-term plans.
Withdrawals from pension pots also dropped during the period, according to official statistics, and it’s clear the pandemic has taken its toll on some pension funds. Equity release could be a sensible option for consumers concerned about the impact of the crisis on their investments.
By way of example, you could make small drawdowns against your property using a flexible Lifetime Mortgage, giving your pension fund and other investments time to recover. With rates starting as low as 2.26%, as of this morning, this might be a sensible option, but will need careful discussion with a financial adviser.
If you’re interested in discussing equity release products, or would like a more informal chat about your finances, please get in touch.