The Equity Release Council (ERC) has introduced a product safeguard that means new customers can mitigate the costs of borrowing in later life.

From the end of March, customers taking out lifetime mortgages that meet the ERC’s standards will be able to make penalty-free partial repayments of their loans.

Alongside the option to reduce borrowing, new customers can also offset the interest of a loan without making an ongoing commitment to additional repayments.

ERC chairman David Burrows says the latest move provides flexibility for customers and sees the sector continue to evolve to meet changing demographic needs.

“As recent years have reminded us, people’s circumstances can change and customers who find they can use earnings, savings or an inheritance to reduce their borrowing in later life will be able to do so without incurring early repayment charges,” he adds.

“The safeguards and standards the Council has worked to develop and uphold over the years will stand consumers in good stead as socio-economic factors give rise to a further increase in demand to access property wealth. The priorities we have set out today will help to further evolve the sector and provide good later life consumer outcomes.”

For more2life corporate marketing director Stuart Wilson, this latest product safeguard adds to the innovation that has been taking place in the equity release market over recent years.

“The ability to make penalty free ad hoc repayments will allow people to better manage their borrowing and potentially help to open up the market to a new range of customers – especially when used in conjunction with interest repayments,” he says.

“This new product standard helps to highlight the hard work that the Council, advisers, lenders and other members of the industry have put in to pushing the sector forward.”

According to equity release adviser, Key, 85% of plans offered the opportunity for borrowers to make penalty-free partial repayments as at the end of 2021.

Key chief executive Will Hale says that this flexibility now being extended to all new customers from the end of March is a “great step forward”.

However, he adds that the industry must “keep pushing the boundaries” in how it can adapt products and advice for “an ever more varied profile of customers” looking for lending options in later life.