How is equity release evolving?

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Equity release has become a popular option and more people are looking for ways to release capital from their property without having to sell.

Sales had nearly doubled over the five years to 2018 according to data from the Financial Conduct Authority. To keep up with demand, product options increased from 86 in January 2018 to 221 in January 2019.

What’s happening with rates?

The rates for equity-release deals have hit record lows in March 2020, with the average rate currently at 4.2%. It is worth noting, however, that interest rates could increase or decrease over time. Your adviser will be able to tell you the prevailing interest rate at the time of your enquiry.

How else can I keep costs down?

The equity-release market is evolving to offer greater flexibility and more choice. Some lenders now allow you to make regular interest payments on the mortgage. This helps to keep the long-term cost down.

What is a drawdown lifetime mortgage?

Another innovation in the lifetime mortgage market is the introduction of drawdown plans. These allow you to take equity as you need it, rather than having to take a lump sum upfront.You could have an £80,000 loan approved, for example, but only take £50,000 initially. You would only be charged interest on the £50,000, with the remaining £30,000 available to you at a later date.

Is equity release safe?

Equity release earned a bad reputation in the 1980s and ’90s when the market was poorly regulated. Thousands of borrowers ended up owing more than their house was worth and their estate wasn’t large enough to pay off the loan. Many lenders pursued borrowers’ children to settle the debts after their parents’ death.

No-negative-equity guarantee

Times have changed and the majority of equity release products now come with a no-negative-equity guarantee. This means that the amount owed can never exceed the value of your home.

Some products allow you to ring-fence a certain amount of cash that will pass to your beneficiaries regardless of how much interest accumulates. Lenders must also be very clear about the cost of their products and the rate at which interest accumulates.

Find out if it’s right for you

The Telegraph Equity Release Service provides comprehensive information to help you decide if equity release is the right product for you. We also have an equity release calculator that can show how much equity you could release from your property.

Speak to an adviser

When releasing equity, it is important to understand your current needs and your future wants. This is because using a portion of your property wealth now may reduce the value of your estate in time and could affect your entitlement to means-tested benefits.

For more information, request a no-obligation face-to-face consultation with an equity release adviser in your area. They will provide a personalised recommendation based on your circumstances.

The Telegraph’s advisers only recommend lifetime mortgages that meet the standards and principles set out by the Equity Release Council. Their products have the no-negative-equity guarantee and you will retain 100% ownership of your home.

Try our free equity release calculator now and see how much tax-free cash you can release

The Telegraph Equity Release Service is provided by Responsible Equity Release. Responsible Equity Release is a trading style of Responsible Life Limited. Responsible Life Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (https://register.fca.org.uk/) under reference 610205. Only if you choose to proceed and your case completes will Responsible Life Limited charge an advice fee, currently not exceeding £1,490.

The above article was created for Telegraph Financial Solutions, a member of Telegraph Media Group. For more information on Telegraph Financial Solutions, click here.

Information correct at date of publication.