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Equity release borrowers save nearly £300m with voluntary repayments – ERC

Shekina Tuahene
Written By:
Posted:
July 1, 2024
Updated:
July 1, 2024

People making voluntary penalty-free repayments on their equity release loans have saved almost £300m in borrowing costs over 20 years, analysis from a trade body found.

Data from the Equity Release Council (ERC) showed that during 2022 and 2023, homeowners with equity release plans made more than 360,000 voluntary penalty-free partial repayments to reduce the sizes of their loans.

The ability to make such repayments has been a compulsory feature on all equity release products that meet ERC standards since March 2022. The repayments typically make up around 8-15% of the total loan each year.

The total value of repayments increased by 18% from £102m to £120m from 2022 to 2023.

The number of repayments fell by 9% during 2023 from 190,377 to 172,711, but the average repayment value rose by 30% from £538 to £697.

Over the same period, the average interest rate on loans where repayments were made rose from 3.87% to 4.39%.

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Small equity release repayments equal big savings

The ERC calculated that even a small monthly repayment of £100 could save a borrower £17,000 in costs over 10 years. This would rise to nearly £50,000 over a 20-year period.

These savings rise to nearly £34,000 and £99,000 with regular monthly payments of £200.

Making an ad hoc repayment of £700 each year would save a borrower nearly £10,000 over a decade and almost £30,000 over 20 years. An annual ad hoc repayment of £1,400 would boost the savings to more than £20,000 and nearly £60,000 over 10 and 20 years respectively.

Jim Boyd, CEO of the ERC, said: “These figures highlight how the flexible design of modern equity release products gives customers more levers to pull to adapt to changing circumstances. The blend of innovative product design and clear consumer standards has proved transformative by putting customers in control.

“While equity release helps people maximise their money in later life, with no ongoing repayments required, people are making significant savings by chipping away at their loans when they can afford to.”

He added: “Small repayment habits add up to significant savings over time. Voluntary repayments make it possible for customers to access property wealth in the here and now while increasing the chances of preserving something to leave behind as a traditional inheritance.”