Equity release rates could fall as competition hots up

Published: 27/06/2013

There are some expectations within the industry that equity release rates could fall to as low as 5 per cent for the first time by the end of the year as competition between lenders heats up.

Whilst there are significantly fewer equity release lenders currently operating in the market compared to pre 2008 (9 vs. 21), the diverse range of lifetime mortgages currently on offer shows that innovation could be the key to attracting not only more home owners looking to release equity but also more providers prepared to lend to them.

Equity release allows a homeowner to unlock some of the funds tied up in their property whilst retaining the right to live there. The amount borrowed, plus the interest accrued, is then payable after the last of the homeowners has either passed away or moved into permanent residential care.

As a result equity release can have an impact on inheritance and therefore should be a well considered decision with the homeowner seeking specialist financial and legal advice.

Richard Espley, Head of Equity Release, explains:

“Equity release has had its fair share of bad press in the past labelled as a product of last resort and criticised as being expensive and impacting on loved ones’ inheritance.

“However equity release has come a long way in recent years and more and more homeowners are now recognising the benefits of utilising their biggest financial asset for a variety of reasons, one of which is, in fact, to provide loved ones with an early inheritance. Certain plans also provide an ‘inheritance guarantee’ enabling the home owner to permanently ring fence a proportion of their property’s value to leave to love one’s later on.

“But before a homeowner signs up to a plan, it is essential they understand the financial and legal implications of equity release. This is where we can help.

“Goldsmith Williams is one of the founding members of the Equity Release Solicitors Alliance (ERSA) and offers professional legal advice for anyone considering up equity release. We can also refer you to a qualified financial adviser who specialises in this market.”

Content correct at time of publication