The average rate stood at 4.99 per cent in June, down from 5.10 per cent a year ago and 6.11 per cent in June 2014, the data showed
Competition in the market is one of the key reasons behind this rate fall, with the number of equity release deals rising to 207 in June 2019, compared to 164 in the same month a year ago and just 48 in June 2014.
Moneyfacts spokeswoman Rachel Springall said the equity release market has evolved over the years, with choice increasing and rates reducing as a result, adding that the market has become much more accommodating to prospective borrowers.
She said: “While rate alone should not be the deciding factor when choosing a lifetime mortgage, it is still a positive indicator that competition is rife in the market.
“The whole package of an equity release deal must be weighed up, especially any fees included. As 66 per cent of the market charges a product fee, borrowers need to be wary of the upfront cost of any deal.”
Advice is vital
Springall added that borrowers needed to be aware of other key differences in the products.
“Flexibility with drawing funds is also a key point to consider,” she continued.
“As shown in the Equity Release Council’s Spring 2019 report, drawdown is more popular with borrowers than taking a lump sum, with two-thirds of new customers opting for a drawdown lifetime mortgage in the second half of 2018. By choosing a drawdown product, consumers could potentially save interest compared to taking a lump sum.
“The reasons why borrowers choose an equity release deal can vary. Whether it be to fund any gap for later life care costs, to reduce the blow of an Inheritance Tax bill, or just to make retirement more comfortable, it is vital consumers get independent financial advice to ensure it is right for them.”
Yesterday in a column on Mortgage Solutions, Moore Blatch senior solicitor Malky Chaloner explained why using equity release to support Inheritance Tax planning had significant potential risks.