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Recovery for equity release with low cost mortgages and pent-up demand

Pent-up demand for equity release and falling interest rates has seen a recovery in plans taken out after slowdown during the first lockdown.

The uncertainty caused by the Coronavirus pandemic pushed interest to new lows and the average cost for equity release buyers reduced to 4.01% based on data from the Equity Release Council.

Low interest rates and gilt yields are reducing the cost of equity release with lifetime mortgages from 2.30% which are slightly higher than the best residential mortgage of 1.99% for a 10-year fixed rate.

Lending for 2020 to new and existing customers reached £3.89 billion with 11,566 equity release plans completed in the last quarter.

There are many ways of raising extra money and equity release is popular with older homeowners, gifting the deposit to children or grandchildren as first time buyers to help them on the property ladder.

Lockdown disrupted homeowners plans

During the second quarter, lockdown disrupted the equity release process with surveyors unable to visit properties. It was not possible to issue provider valuations and offers causing them to re-inventing how to work in the new conditions.

Lockdown reduced the number of new plans with only 2,229 completed in May 2020 compared to 4,164 for the peak in October.

There were 40,337 new plans agreed in 2020 down 10% compared to 44,870 the previous year with more completed in the last quarter due to pent-up demand from earlier in the year.

See how much cash you can take from your home, repay an existing mortgage and the leading providers at this link:
Equity release calculator for instant results and figures for your home.

The lockdown reduced the number of home movers with the stamp duty holiday boosting demand for older homeowners to trade up to more desirable property using equity release.

Of those new customers to equity release in the fourth quarter, 59% selected a drawdown mortgage taking an average £81,724 initially with £33,511 in reserve for later.

There were more homeowners repaying an interest only mortgage and lump sum mortgage represent 43% of all new plans in 2020 which is the biggest proportion reached for twelve years.

Lump sums agreed in the fourth quarter increased in value by 3% or £3,443 with homeowners releasing an average of £104,501.

Fewer returning customer in 2020

For homeowners with existing equity release plans the number of drawdown customers returning were lower by -21% and further advances down by -11%.

There were fewer customers using drawdown cash over time in the fourth quarter down -25% at 6,792 and this compares 9,096 for the same period in 2019.

The average amount of drawdown taken is £11,520 which is similar to the third quarter of 11,424 and -11% lower than the second quarter of £13,005.

For old equity release policies where the provider fixed interest rates are 6% or higher, it is possible for a remortgage buyer to consider a new plan with interest rates from 2.4% which could save on roll-up interest in the future.

It is possible for buy-to-let landlords to have a higher income at retirement with a lifetime mortgage for properties in their portfolio allowing interest payments to roll-up.

What are your next steps?

Talk to our London City Mortgage advisers if you are an older homeowner releasing equity from your property, we can recommend the lifetime mortgage to access wealth to consolidate debt, home improvements or gifting to a family member.

Find out about the actual providers deals and offers when taking cash from your home or repaying a mortgage at this link:
Free equity release quote with accurate interest rates from providers.

At LCM our mortgage brokers can provide advice if you are a first time buyer, moving home, want to remortgage your existing home to a new cost effective mortgage deal or are a buy-to-let investor.


Mortgage Best Buys

These are examples of mortgage products we can approach with many more offering interest rates and flexibility to meet your needs.

1.17% Fixed Rate
60% Loan to Value
£1,025 App Fee
Until 31/09/2022
Reverts to 3.59%
1.18% Fixed Rate
60% Loan to Value
£1,034 App Fee
Until 31/10/2022
Reverts to 3.59%
1.19% Fixed Rate
60% Loan to Value
£999 App Fee
2-Years Time
Reverts to 3.59%
1.16% Fixed Rate
60% Loan to Value
£1,525 App Fee
Until 01/11/2022
Reverts to 4.09%

The latest mortgage news


14 May 2021

Value of homes sold doubles as demand reaches new highs

The value of homes transacted has doubled compared to last year as demand for property hits new highs while supply is restricted.

10 May 2021

Equity release products rise by over 100 with more competition

The competitive equity release market has seen over 100 products on the market as providers launch new features to attract customers.

23 Apr 2021

Asking prices for properties on the market reach record high

New properties on the market hit record asking prices up 2.1% this month as demand drives sales to the fastest ever pace.

16 Apr 2021

Equity released from homes falls due to pandemic lockdown

The pandemic lockdown restricts the amount of equity released from properties in 2020 even though interest rates fall to record lows.

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  • IMPORTANT

    Equity Release may involve a Lifetime Mortgage or a Home Reversion Scheme. To understand the features and risks, please ask for a personalised illustration. Equity Release may affect your entitlement to means tested state benefits and will impact on the size of your estate. For Equity Release London City Mortgages charge a fixed fee upon completion of £695. For Mortgages a fixed fee is charged on application. Typically this is from £295 up to £495 for the services selected.

  • WARNING

    Equity Release - Equity Released from your home will be secured against it. Mortgages – Your home may be repossessed if you do not keep up repayments on your mortgage or other loans secured against it. Think carefully before securing other debts against your home. The information contained in this website is subject to the UK regulatory regime and is therefore intended for consumers based in the UK.

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