The Equity Release Council has launched a new product standard that will allow borrowers to reduce their interest costs.

This option to make penalty-free partial loan repayments has become an increasingly common feature of modern equity release products, and enables customers to mitigate the effects of compound interest and cut their borrowing costs in later life.

It has now been made the fifth product standard or prerequisite for all plans recognised by the Equity Release Council, the sector’s representative body.

The option joins the Council’s four existing product standards that have been in place since 1991. These are a borrower’s right to remain living in their home for life with no repayment obligations, a fixed or capped interest rate for life, a no negative equity guarantee, as well as the right to move their loan to another property providing it is acceptable under lending criteria.

Nearly 700 firms have signed up to practice in line with the Council’s standards, including all current product providers. More than 75,000 new and existing customers accessed funds from their properties last year via Council members to support their finances.

Equity Release Council CEO, Jim Boyd, commented: “The right to remain in your home for life, with no requirement to make ongoing repayments and no threat of repossession, has been central to the appeal of equity release since 1991 and remains a core pillar of the modern market.

“Our new product standard adds to this by ensuring people have the freedom to reduce their borrowing if circumstances change. It enables equity release customers to mitigate the effects of compound interest and reduce their borrowing costs in later life, which we know is often one of their main concerns.

“The market’s evolution means many customers are already saving tens of millions of pounds in interest costs by making penalty-free partial repayments as and when they can afford to. By introducing the new product standard, we expect many more customers are set to benefit as all new products will have this safeguard built in.”

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