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.”
Equity Release 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.”
At Viva Retirement Solutions, we offer whole of market advice on equity release and lifetime mortgages and will work with you to find the solution that is right for you and your family. Please contact us to arrange a no-obligation initial visit to discuss your situation.
Alice Watson, head of marketing and communications at Canada Life Home Finance, said the demand that had brought down the average rate was partly down to product innovation.
She said: "Much work has been done to improve the flexibility of equity release products. This has certainly made them more accessible and adaptable, catering for a greater range of circumstances.
"Advisers are critical to the sector’s upwards trajectory but the current advice gap may impact the market’s momentum.
"That is why it’s so important the sector does all it can to ensure advisers have access to the information and support they are asking for."
Stuart Wilson, marketing director at More 2 Life, agreed that product innovation was high on lenders’ agenda but added a further push was needed for more flexible products that could "cater to the customers of today".
Will Hale, chief executive of specialist adviser Key, said: "Equity release rates are now closer than ever to those of standard residential products starting from as little as 3.32 per cent fixed for life.
"However, when speaking to clients, advisers also need to ensure that they explain the impact of features such as the ability to make interest repayments, why downsizing protection might be useful and how inheritance protection.
"If a client doesn’t have the flexibility they need or the loan to value is insufficient to achieve their objectives, rate may be of less consideration."
He went on to say that the growing range of products illustrated why good advice was key and why advisers were crucial in ensuring customers get the right product.
Managing director of lifetime mortgages at OneFamily, Nici Audlham-Gardiner, added that the data reflected that equity release had becomie more mainstream over recent years and was now an increasing part of retirement planning.