Even before the cost-of-living crisis, many older homeowners were struggling to fund their desired lifestyle in retirement. Now, with inflation at the highest rate in decades, interest rates on the rise, and the stock market down, you too may be looking for ways to cope with the rising cost of living. A type of Equity Release called a Lifetime Mortgage may be an option, but there are some important factors to bear in mind. In this article, we’ll give you an impartial assessment of the current Equity Release market to help you understand whether this is the right option for you.
Have Equity Release Rates Increased?
Equity Release rates, like all forms of borrowing, have risen in recent months. In January 2022, the average interest rate for Equity Release stood at around 4%*, however, as of November 2022, average interest rates have gone up to around 7-8%. This is quite a jump, but not far off average rates of the past, as in recent years, Equity Release rates had dropped considerably.
How Would Higher Equity Release Rates Affect My Plan?
With Equity Release, you can choose to let the interest roll up into the loan and not pay any repayments, as the interest and loan can be paid back when you die or move into permanent care. In this scenario, higher interest rates may not seem like a big issue, apart increasing the amount you owe more quickly and reducing the amount of your estate left over to pass on to your loved ones. However, the other downside to higher rates, is that it can limit the amount of equity you are able to release from your property. If you choose to protect your remaining equity by paying off the interest as you go, higher interest rates will lead to higher monthly payments.
Will Equity Release Rates Come Back Down?
The general view in the market is that Equity Release rates, along with mortgage rates, are currently peaking as of November 2022. In other words, the market expects and hopes that rates will come down slightly in the coming months. However, rates are likely to stay higher than 2021 levels for at least a couple of years. Of course, we can’t know for sure what will happen – rates could rise further, stay high for longer, or fall quicker. All we can do is explain the market predictions.
What’s Going to Happen to the Property Market?
Again, it’s important to emphasise that we don’t know what will happen to the property market for sure. As of November 2022, there have been reports of the market slowing and even falling in some parts of the UK. There are also predictions that property prices could fall significantly in 2023. What does this mean for Equity Release? The amount you can release is based on a percentage of the value of your property, so as a general rule of thumb, if your home is worth less, the maximum you’ll be able to release will be less.
Should I Take Out Equity Release Now or Wait?
We can answer this question accurately once we’ve spoken with you about your situation and needs. But to give you an idea, we are currently only advising Equity Release to clients who are in urgent need of funds. If you fall into this category, then there may be a suitable plan that could help you to achieve financial stability and even improve your lifestyle in retirement. However, for clients who are interested in releasing equity but have less of an urgent need, our general advice is to wait a few months to see if interest rates come back down a bit. Either way, we recommend you get in touch with us today and tell us about your situation. We’ll be able to give you specific advice, see what options are available to you, and keep you informed about the latest deals so you can take advantage of them when the time is right.
The Bottom Line
Equity Release rates have risen quite considerably in recent months, with the average rate currently being around 7-8%. Depending on what deal you get, this could mean that the amount you owe grows more quickly (if you choose not to pay any interest), your monthly payments are higher (if you choose to pay the interest as you go) and the maximum amount you can release may be lower. Despite higher rates, if you are in urgent need of funds, Equity Release could help you cope with the rising cost of living. If you are in no urgent need, you may be better off waiting a few months to see if rates come back down. Either way, we recommend talking to one of our friendly Equity Release advisors today to discuss your options and to stay informed about the latest deals.
At Michael Usher Mortgage Services we’ve been helping our local community with trusted Equity Release advice for over 30 years. You probably have lots of questions, and we’re here to help you understand how these products work and whether they are the right choice for your situation. We’re never pushy, the decision is always yours to make, and we welcome your friends and family to join in the discussion.
Book your FREE initial consultation with one of our friendly advisors to learn more about Equity Release. We have offices in Frimley and Basingstoke, or we can help you remotely via phone or video call if you’d prefer. We look forward to chatting with you!
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Equity release includes Lifetime Mortgages and Home Reversion Schemes. We can advise and arrange Lifetime Mortgages and will refer to an approved specialist for Home Reversion Schemes.
Lifetime Mortgages are applicable to over 55s only, can affect eligibility for means-tested or state benefits and may affect the inheritance you leave.
Please be aware that by clicking on the above links you are leaving Michael Usher Mortgage Services’ website. Please note that Michael Usher Mortgage Services nor HL Partnership Ltd are responsible for the accuracy of the information contained within the linked site(s) accessible from this page.
Michael Usher Equity Release acts as an introducer. Michael Usher Equity Release is a trading style of Michael Usher Mortgage Services Ltd. Michael Usher Mortgage Services Ltd is an appointed representative of HL Partnership Ltd, which is authorised and regulated by the Financial Conduct Authority.
