The decision is expected to save equity release customers almost £100m in interest costs over the next 20 years. 

The move will help customers to mitigate the effects of compound interest, to cut their borrowing costs in later life and to increase their chances of leaving a traditional inheritance. 

In 2021, lifetime mortgages customers made penalty-free partial loan repayments of £78m, with more than 125,000 penalty-free part repayments made during the year, an average of £608 for each repayment. 

Altogether, these customers would make a combined saving of £39m in interest costs over a decade, the equivalent of £99m over 20 years. 

The standard adds to the four existing standards in place, which include the right for equity release customers to remain living in their home for life and a fixed or capped rate of interest. 

The other two standards are a no negative equity guarantee, which protects customers from owing more than their home is worth or leaving debt to their families or beneficiaries, and the right to move their loan to another acceptable property. 

According to the Equity Release Council, nearly 700 firms have signed up to practice in line with these standards.  

The protection they provide are increasingly seen as important by customers; research from Mintel’s annual Equity Release Schemes study found that “strong consumer protection” was the most important feature of equity release products for potential customers. 

Equity Release Council chief executive Jim Boyd says: “The right to remain in your home for life, with no requirement to make ongoing repayments and no threat of repossession, has been central to the appeal of equity release since 1991 and remains a core pillar of the modern market. 

“Our new product standard adds to this by ensuring people have the freedom to reduce their borrowing if circumstances change. It enables equity release customers to mitigate the effects of compound interest and reduce their borrowing costs in later life, which we know is often one of their main concerns.” 

He adds: “The market’s evolution means many customers are already saving tens of millions of pounds in interest costs by making penalty-free partial repayments as and when they can afford to. 

“By introducing the new product standard, we expect many more customers are set to benefit as all new products will have this safeguard built in.”