The number of share release transactions more than doubled
Number of equity release transactions in the market have more than doubled in just two years, with lenders providing more choice and flexibility to borrowers.
Research by Moneyfacts.co.uk found that there are 698 share release deals in the market this month, up from 480 deals available in August 2020 and 383 deals available in August 2019. Along with As agreements grew, lenders also increased the maximum loan-to-value (LTV) ratio for share release transactions, from 49% to 50% on average.
The increase in the number of share release agreements has also resulted in greater flexibility available on plans. For example, it is now common for capital release plans offering competitive rates to allow borrowers to withdraw funds and many will also allow partial or interest payments. It can help reduce the cost of borrowing via a release of equity.
“The equity release market has remained resilient in 2021 and, in fact, business is booming and is expected to grow in the years to come,” explained Rachel Springall, finance expert at Moneyfacts.co.uk. “Advisors remain bullish in the industry and lenders have made it clear that they are ready to compete and adapt their lines to borrower demand. Over the next decade, the amount of equity released per year is expected to rise from £ 3.7bn in 2021 to £ 6.4bn according to More2Life. “
She added: “A recent study by More2Life found that 94% of advisors are confident in the stock release market in the next 12 months and 54% cited product innovation as an important factor. The rise in product choice may offer an offering more suited to individual circumstances, and lenders have shown their commitment to adapting their lines. Right now, Just currently has the widest range with over 300 transactions, which has grown thanks to the introduction of a fixed prepayment option, which has doubled its range. More2Life, Legal & General Home Finance and Pure Retirement are the next brands to offer the highest volumes of options for browsing.
The busiest month for life mortgage business from April to June 2021, according to the Equity Release Council (ERC), was June, which could be attributed to the rush to take a stamp duty break. for borrowers hoping to pass on some wealth as an early inheritance to their children to help them move up the home ownership ladder. Borrowers can also use real estate to make improvements to their home, either by using a direct debit facility as and when needed, which remains popular with new customers, as opposed to a lump sum mortgage for life. While research from the ERC suggests the withdrawal was moderate during the pandemic, the return of withdrawal activity from April to June 2021 was the largest segment of recovery from April to June 2020 with a number of customers up 67%.
“Borrowers looking to take advantage of freeing up equity should seek independent, unbiased advice to make sure this is the right option for them. It doesn’t matter if they are adamant that they want to free up the equity in their home, it is always a good idea to get a second opinion as there may be other alternatives. Starting a conversation with any family member is also helpful in avoiding embarrassment about the inheritance.