Older homeowners wanting to borrow money using a Lifetime Mortgage, the most common form of equity release, have been enjoying the lowest interest rates on record this year. However, recent global events are putting upwards pressure on these products, as David Forsdyke, our Later Life Finance expert, explains

Back in early October, I wrote a piece forecasting a rise in Lifetime Mortgage rates. That day arrived yesterday. Providers More 2 Life and Pure Retirement, which were both marketing products at a record low 2.22%, signalled they would be withdrawn and replaced with equivalent products at a rate of 2.51%.

The reason for this upwards move is that interest rates on Lifetime Mortgages have a close correlation with long-term gilts and other fixed interest investments. These rate are typically fixed for life, so the provider is taking a view on long term returns.

But why are Gilt yields rising? In response to the positive vaccine news, and encouraging news on a Brexit deal being imminent, global equity markets have improved. This rally has filtered through to UK long dated interest rates, and yields on Gilts are now slowly improving as result.

This is an important measure for many providers in the Lifetime Mortgage market. If yields on 10 to 15 year Gilts continue to rise, history tells us Lifetime Mortgage rates will follow suit. Don’t panic, there are still some extremely low rates available by historic standards, but such activity suggests rates will rise. I would not be surprised if other lenders announce increases in the coming weeks.

If you would like to secure a low rate today, or simply need to discuss the idea of taking out a Lifetime Mortgage or other equity release product, please get in touch.