The number of product options available across the later life lending market has more than doubled in two years, helping to drive growth in the equity release market.
A total of 139 products were available in August 2018, up from 58 in 2016, according to the
Autumn 2018 Equity Release Market Report published by the Equity Release Council. By contrast, just 24 product options existed in 2007.
The base of equity release customers is up by 81% from H1 2016 to H1 2018.
Four in five product options within the equity release market no offer consumers the choice to make ad-hoc, penalty-free voluntary or partial repayments of their loan, up from 68% a year ago, while lifetime mortgages now include the option to ringfence equity.
In addition, increased choice has come with lower pricing driven by greater competition in the sector: the average interest rate for equity release products was 5.22% as of July 2018, down from 5.27% in July 2017 and from 5.96% a year earlier.
Comparing average rates by customer rather than by product shows that the typical new customer paid less than 5% across both drawdown and lump sum plans.
Due to the changing demographic landscape – in 50 years’ time the nation is expected to have an additional 8.6 million people aged 65 and over – demand for equity release is likely to continue to rise as more people look to supplement their savings and help meet pressing social needs, including mounting care costs and intergenerational lending.
Latest industry data has shown for every £1 of savings withdrawn via flexible pension payments in the last 12 months, 50p of housing wealth was unlocked via equity release – up from 40p a year earlier.
Equity Release Council chairman David Burrowes stated: “As customers navigate their way through a growing range of product choices – including retirement interest-only mortgages – the appropriate advice, guidance and support is needed to weigh up the various benefits, costs, flexibilities and protections to ensure they are suitable to meet both current and future needs.
“Industry and regulators must continue to work to ensure customers are aware of all the options available to them when deciding how best to support themselves and their families in later life, taking all their assets – including pensions, savings, investments and property – into consideration.”
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