Nearly a fifth of property wealth released during a record-breaking first half of the year came through remortgaging as customers benefited from increased flexibility and lower rates, new analysis from equity release adviser Key Later Life Finance shows.
Key estimates around 19% of all equity released – more than £650m – in the six months to July was by customers switching to new plans.
Its unique data showed that 3,817 customers remortgaged in the six months taking advantage of lower rates and newer more flexible plans compared with 2,130 in the same period last year – a 79% YOY increase.
On average customers chose to remortgage sums of £130,808 from 5% initial rates to 4.2% which could save them up to £16,000 in interest over 10 years, Key’s analysis shows.
These lower rates will also benefit those customers who are looking to service interest or mitigate roll up by making capital repayments or are looking to take a further advance.
At the end of H1 2022, customers had 676 products to choose from as lenders continue to innovate.
Clearly, highlighting the need for expert advisers to help customers at outset select the right mix of product features to fit their individual circumstances and to continue to review how these features can be best used through the lifetime of the loan as circumstances change.
Variable and gilt-linked repayment charges (ERC) which can be an issue for remortgaging now account for just 12% of plans available.
Interestingly, with interest rates rising, some historic customers who were previously unable to rebroke due to these ERCs may have more options.
Flexible features continue to grow in popularity with downsizing protection available on 70% of products compared to 50% last year.
Inheritance protection is available across 41% of products compared to just 28% last year while all new plans now guarantee customers the right to make ERC-free repayments within lenders’ criteria.
Interest rates remain at historically low levels
Bank of England base rate rises have pushed up the cost of equity release plans, but the average rate taken out at the end of the first half of this year was 3.65% compared to 4.33% in the first quarter of 2019. The table below shows the trend on average rates since 2019.
| YEAR | AVERAGE EQUITY RELEASE RATE Q1 | AVERAGE EQUITY RELEASE RATE Q2 | AVERAGE EQUITY RELEASE RATE Q3 | AVERAGE EQUITY RELEASE RATE Q4 |
| 2019 | 4.33% | 3.92% | 3.72% | 3.15% |
| 2020 | 3.1% | 3.18% | 3.05% | 2.8% |
| 2021 | 2.84% | 3.02% | 3.16% | 3.07% |
| 2022 | 3.35% | 3.65% |
Will Hale (pictured), CEO at Key, said: “Remortgaging has also always been a core part of a specialist equity release adviser’s toolkit with advisers continuing to engage with customers throughout the life of their loan as a matter of course.
“Today’s figures highlight the benefits that customers can see from reviewing their equity release borrowing.
“House price increases have also contributed to the growth in this market with existing customers realising that remortgaging is not only about reducing rates but could also provide the opportunity to raise additional capital which is particularly relevant for some customers as the cost-of-living crisis hits finances.
“While arguably remortgaging may slow down as rates rise, the increasingly flexible nature of equity release products mean that this trend is likely to continue well into the future and become a feature of this market.”
