What Are the Current Average Equity Release Rates?
As we'll explain, average equity release rates vary considerably, depending on many factors.
For example, if you want to borrow £500,000 as 50% of your property value, you will pay a different rate from someone looking to borrow £500,000 in regular instalments and at 25% of their equity.
Rough averages sit at around 3.4% to 6.5%, and you'll see a few illustrations of what terms you might get for your interest rates in the table below.
What Equity Release Rates Am I Likely to be Eligible for?
Eligibility will depend on your age, location, property value, circumstances, loan amount, and other factors, but the below table looks at a few indicative rates from well-known equity release lenders to give you an idea.
|
|
Monthly interest charge
|
Annual interest charge
|
Lump-sum payment limits
|
Maximum loan value
|
|
Lender A
|
3.49%
|
3.55%
|
£10,000 to £750,000
|
42%
|
|
Lender B
|
3.4%
|
3.45%
|
£100,000 to £2 million
|
38%
|
|
Lender C
|
3.52%
|
3.58%
|
£10,000 and upwards
|
40%
|
|
Lender D
|
3.61%
|
3.67%
|
£10,000 and upwards
|
50%
|
|
Lender E
|
3.93%
|
4.0%
|
£15,000 to £500,000
|
45%
|
|
Lender F
|
4.12%
|
4.12%
|
£15,000 to £600,000
|
45%
|
Comparing Rates Between Equity Release Companies
There are multiple variables between equity release products, so the best way to compare the rates offered is to analyse two similar schemes.
It's almost impossible to quantify which product is 'better' if one is interest-only and the other requires no repayments.
Look for these different terms to make a fair comparison:
- Lump-sum or drawdown payments - you can either borrow against your equity as a one-off, larger value or have a facility you can make withdrawals from as and when you need to.
- Interest-only or no repayments - interest-only equity mortgages require a monthly interest repayment. This option stops the loan balance from accumulating but needs an affordability assessment.
- Payment flexibility - equity release mortgages with optional ad hoc repayments tend to be more expensive since the lender has less control about the end balance or when you will make deposits.
It would also help to look for maximum loan values on each scheme (most lenders have a cap on lump sum values).
Finally, the value of your property may influence the lender you choose. Most will consider properties worth £70,000 or above, but upper and lower limits vary considerably.
Are There Cheaper Alternatives to Equity Release?
Equity release is often considered 'cheap' because you don't need to make any repayments during the lifetime of the mortgage.
The interest is rolled up into the loan balance and recouped when the lender sells the property when you move into care or pass away.
However, you should understand the overall interest charges to ensure your beneficiaries receive the maximum benefit from the balance of the sale proceeds when the lender sells the residence.
Please get in touch if you'd like recommendations about other mortgage products, such as a second charge mortgage, which might be cheaper in terms of retaining property ownership.
Equity Release Advice From the Independent Experts
If you're interested in comparing equity release rates currently available or assessing the pros and cons of comparable products, please contact Revolution Finance Brokers.
Our advisers are independent and whole-of-market and will ensure you have full oversight of the varying options and can make informed, financially secure decisions.
