The latest report from the Equity Release Council revealed a total of 488 products were available at the end of 2020. Retirement interest-only (RIO) mortgage options were also improving with more than 100 deals available for the first time.

With so much competition, average interest rates were naturally impacted – the Council’s data revealed typical lifetime mortgage products rates fell to a record low of 3.95% in January 2021.

What’s more, a quarter of products now offered rates of 3% or lower. These figures, said Will Hale the CEO of later life provider Key, were lower than some mortgages.

“Competition across the equity release market has meant that the lowest rates available, which are fixed for life, are now lower than the average 10-year fixed rate mortgage,” he said.

Retirement planning

Evidence of the growing role of later life lending in retirement planning also emerged in the report, with data showing over-55s withdrew 46p of property wealth for every £1 of flexible pension payments in H2 of 2020.

And while H1 figures were shaken by the impact of Covid on the market, H2 figures revealed signs of recovery in the sector. Indeed, the Council revealed the volume of new equity release plans taken out during the last six months of the year was 19% higher.

David Burrowes, chairman of the Equity Release Council, said: “After the unprecedented upheaval of early 2020, the equity release market showed signs of recovery as households and businesses remained resilient against a challenging backdrop.

“Property wealth ranks second only to pensions in terms of its importance to household finances across the country.

“The transformation of later life mortgage products in recent years has given people more opportunities to access property wealth at affordable rates.

“Accessing property wealth will play a vital role in retirement planning, both now and in the years to come.

“For today’s retirees, it can make the difference between making ends meet or enjoying a more comfortable lifestyle by boosting their pension income, improving or adapting their homes life and paying for domestic care support.

“For younger generations, it can open up the possibility of receiving a ‘living inheritance’ to support their own financial goals, such as getting on the property ladder.”

Key data

Some key points to emerge from the report are listed below. You can see the report in full here.

• The total value of UK private property passed £6 trillion for the first time on record at the end of 2020 as market activity recovered from the first coronavirus lockdown
• Discounting mortgage debt, the amount of UK property equity which is privately owned reached a record £4.6 trillion
• The average loan-to-value of UK property reduced to 24.6%, the lowest level seen since before the 2007/8 financial crisis
• On an individual basis, the average UK property owner held equity of £189,549 alongside an average loan of £61,951
• Although new customer activity remained 6% below pre-pandemic levels in H2, it showed signs of underlying market resilience by surpassing 20,000 plans agreed between July and December
• In the face of economic uncertainty, new plans were down 10% year-on-year compared with an 11% fall in further advances and a 21% fall in returning drawdown customers
• Over three fifths of lifetime mortgages now allow voluntary partial capital repayments with no early repayment charge