Defaqto analysis has found that equity release products are now being offered at record low interest rates.
The lowest interest rate available today is 2.84% from More 2 Life, at age 65. Rates have fallen in the last 18 months, the average interest rate offered was 5.4% for customers aged 65, compared to 4.55% today.
Retirement Interest Only (RIO) mortgage rates have also dropped and the lowest rate available today is 2.79% from Marsden Building Society. However, RIO mortgages are also secured against the borrower’s home and independent financial advice should be taken before committing.
Brian Brown, consumer finance spokesperson at Defaqto, said: “For those in later life who own their own home but need cash, borrowing money is not easy. Most standard loans and credit deals are not available to pensioners, leaving them with little choice but to release equity from their home. Equity release has been criticised for being expensive and inflexible in the past, but with historically low rates and portable loans, they are a much more viable option for some borrowers.
“Downsizing to a smaller or cheaper property may be a better option if you are able to move. That way you can free up cash from the sale to enjoy without paying interest. This though is not always a practical option and many people simply do not want to leave a home they lived in for many years.
“Releasing equity from your home is a big decision with ramifications for the rest of your life; you should take advice from an independent and qualified professional before making any decisions. Choose a reputable provider that is a member of the Equity Release Council (ERC). All Defaqto 5 Star rated products are from members of the ERC, have a no-negative-equity guarantee and allow you to port the loan to a new property, should you wish to move.”