The number of voluntary penalty-free partial repayments made by equity release customers increased by 48% last year, a new report from the Equity Release Council has revealed.

More than 90,000 equity release customers reduced their loans by £102m in 2022 by making 190,374 partial repayments throughout the year, 48% more than were made in 2021.

By reducing their loans in this way, the Council has estimated that these customers stand to save a further £116m in future interest costs over the next 20 years.

Making voluntary penalty-free partial repayments for equity release was made a compulsory feature for all products that meet Equity Release Council standards in March last year. It meant that customers can now choose to make repayments while they are still alive, reducing their interest costs and preserving more of their property wealth for future use or to pass on as an inheritance.

“Modern equity release is an incredibly versatile product,” commented chair of the Equity Release Council, David Burrowes. “People can choose whether they want to make repayments without fear of losing their homes, and since this feature was embedded into Equity Release Council standards, we have seen people’s usage grow and their interest savings add up.

“By making modest repayments when they can afford to, customers can benefit from their property wealth in the here-and-now while reducing their overall borrowing costs by tens of thousands of pounds.”

The Council’s Spring 2023 Market Report shows equity release activity reached record levels in H2 2022, despite the after-effects of the mini-Budget in September prompting a slowdown in activity during Q4. Since then, product pricing has fallen gradually over the last five months to an average of 6.23% at the start of April 2023, with advertised rates as low as 5.52%.

Product numbers have edged back towards 200, although the report also revealed that maximum loan-to-values (LTVs) have been tightened from 47.0% in August 2022 to 38.7% in April 2023.

“A nation where so many pensioners struggle to afford a moderate standard of living simply cannot ignore the potential for property to help bridge the gap,” Burrowes added. “Equity release could make a decade of difference or more to someone whose pension income might otherwise only cover a basic lifestyle.

“The option of turning property wealth into pounds in their pocket has never been more important for consumers and our ageing society. As the market recovers from the economic shocks of late 2022, it is vital that people consider the role of their homes in covering the costs of later life.”

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