This is the fifth product standard or requirement for all equity release plans recognised by the ERC.
The other standards include giving borrowers the right to remain in their homes for life with no repayment obligations putting them at risk of losing their property, a fixed or capped interest rate for life, and a no negative equity guarantee.
The right to port a mortgage provided it falls under accepted criteria is also one of the ERC’s product standards.
The ERC said people with lifetime mortgages, which account for the majority of equity release products, made more than £78m in penalty-free partial loan repayments last year.
Jim Boyd, CEO of the Equity Release Council, said: “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.
“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.”
Alice Watson, head of marketing, insurance at Canada Life, said: “This is a welcome step in the right direction from the Equity Release Council and something we’ve already been working towards at Canada Life. We know that our customers value flexibility around making repayments, and both customers and the industry will undoubtedly benefit from making this the norm.”