Equity Release Supermarket: Research dispels equity release rate myths

Ryan Fowler

April 21, 2020

Mark Gregory ERS

With the Equity Release Council’s (ERC’s) Spring 2020 report showing that average equity release rates fell to 4.48%, with 40% of plans offering rates below 4%, Mark Gregory, CEO of Equity Release Supermarket, has said myths around interest rates in the sector have finally been dispelled. 

The average standard variable rate (SVR) of the six top high street banks currently stands at 3.54%. Therefore, the margin between lifetime mortgage rates and standard residential mortgage rates is becoming closer and is now under 1%.

Gregory said: “The gap between lifetime mortgage interest rates and residential mortgage SVRs continues to narrow and lifetime mortgage lenders are expanding the range of flexible features available.

“For example, plans offering fixed term, early repayment charges (ERCs) has increased by 36% year on year and the number of plans offering regular interest repayments has jumped by 80%. Additionally, 127 plans have the facility to make partial repayments.”

“In Q1 of this year, 24% of our customers were aged between 61-65 and 18% were under 60. Only 13% of our customers were aged over 76.

“The ‘new breed’ of lifetime mortgages is attracting a younger and financially savvier customer who are looking to use lifetime mortgages as an alternative to traditional mortgage lending or as a solution to satisfy shorter term lending needs.

“This dispels the myth that younger people should not consider equity release because of the effects of compound interest. The ability to manage both interest (and capital) repayments is now widely available.

“This trend was reflected in how our customers chose to use their money released in Q1 of 2020, as we saw a rise in those looking to repay their existing mortgage, which increased from 25% to 27% YOY.”

“At Equity Release Supermarket, we also actively encourage consumers to switch their plans when it is in their financial interests to do so. We are the only equity release broker to provide a ‘switch plan’ calculator on our website and we saw the percentage of customers switching their plans jump from just 1% to 4% this quarter.”

Post Brexit confidence also returned to the market and this was evident in the resurgence of growth in both the London and South East regions.

Gregory (pictured) added: “The number of plans completed in London increased by 31% YOY and the average case value increased by 85%. In the South East, plans completed increased by 20% and the average case value was up by 29%.

“As we move into April, we’re seeing similar levels on enquiries as we did last year, as a consequence of the recent changes to our lives that we are all experiencing.

“That said, I have been impressed and hugely encouraged by the positive way the equity release industry and the Equity Release Council has responded to remote working and social distancing measures – with lenders providing ‘desktop’ valuations and the ERC relaxing it’s governance in the short term to allow for remote conveyancing.

“At Equity Release Supermarket, we were already well placed to manage our way through, given our range of digital tools, our unique customer portal and the fact that 40% of our business was managed over the

telephone in 2019. We also recently launched our video chat facility for customers who would still like the reassurance of meeting their adviser ‘face to face’.

“It would be remiss to assume events will be behind us quickly, but we expect to see the trend of the merging of traditional mortgage lending and lifetime mortgages for the over 55s continuing. We envisage further growth of this market segment but given current economic uncertainty, we cannot predict the impact on the housing market and house prices, which in turn influences the wider equity release market.”

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