Very few of us can buy something without checking the price tag, and those that are lucky enough to be able to do so probably aren’t worried about, or don’t have, a mortgage.
Interest rates in the mortgage market have been falling steadily for some time, and the Yorkshire Building Society has recently launched a staggeringly low 0.89% mortgage, the lowest in British history. Of course, the deal is a short-term two year plan, but the rate is certainly eye-catching and mirrors a similar trend occurring in the equity release industry.
Average interest rates on lifetime mortgages have dropped to 5.63%, and some lenders are even offering as low as 3.9%. In the past 12 months alone average rates have fallen by 0.7%, which is significant, but our research at Bower Retirement shows that advisers feel that rates must continue to fall to continue the great start we have made to 2017.
Annual lending has set new records year-on-year since the £1bn mark was broken back in 2014, and then doubled to £2bn just two years later, and 2017 looks set to be yet another record-breaker. £697m was released in the first three months of this year, a 77% increase on Q1 in 2016, and much of this is down to falling rates. But as we continue through the year, more products with lower rates would help catalyse further market development.
Nearly two out of five of Bower advisers surveyed said more rate cuts were needed while 67% want more lenders to launch into the market to increase competition. I’m certain that this is a view held industry-wide as more lenders will be of benefit to everyone.
Ultimately, providing the best, most flexible products possible is the number one goal, but let’s not kid ourselves – rates are important. Unfortunately however, equity release rates and products will continue to be unfairly compared to mortgages in the mainstream market. We will never get to a sub-1% rate on the lifetime mortgage for a number of reasons, but there’s no reason not to be positive and continue to create a market where lenders feel confident about launching products with lower rates. After all, we want our customers to get the best deal possible.