Equity release customers are set to save almost £300m in borrowing costs over the next two decades, having used the freedom to make voluntary penalty-free loan repayments, the Equity Release Council has revealed.

New data from the Council shows that during 2022 and 2023, homeowners with equity release plans have made more than 360,000 voluntary penalty-free partial repayments to reduce the size of their loans.

During this period, the total value of repayments also grew by 18% from £102m to £120m.

Lifetime mortgages are designed to allow older homeowners to access money from the value of their homes. While the loan plus interest is typically repaid when the customer dies or goes into long-term care, helping to maximise their available money in later life, they can make voluntary penalty-free partial repayments to reduce their total borrowing costs.

The ability to make these repayments, which equates to 8.15% of the loan each year, has been a compulsory feature of all products that meet Council standards since March 2022.

By reducing the amount owed, the Council said this helps to reduce the compounding of interest over time, meaning that customers do not lose the right to make the voluntary repayments if they choose not to do so and have no risk of their home being repossessed for missing repayments.

The Council has found that although the number of repayments in 2023 dropped by 9%, the average repayment increased by 30% from £538 to £697 in this period.

It added that repaying £100 a month could help the typical customer reduce their total borrowing costs by almost £17,000 over a decade and almost £50,000 over 20 years.

Furthermore, making an ad hoc repayment of £700 every years would save almost £10,000 over 10 years and nearly £30,000 over two decades.

Chief executive officer at the Equity Release Council, Jim Boyd, said: "These figures highlight how the flexible design of modern equity release products give customers more levers to pull to adapt to changing circumstances. The blend of innovative product design and clear consumer standards has proved transformative by putting customers in control.

"While equity release helps people maximise their money in later life, with no ongoing repayments required, people are making significant savings by chipping away at their loans when they can afford to.

"Small repayment habits add up to significant savings over time. Voluntary repayments make it possible for customers to access property wealth in the here-and-now while increasing the chances of preserving something to leave behind as a traditional inheritance."

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