Don’t miss out on the lowest equity release interest rates of all time!
If you released equity before 2020, you’re likely paying more than you need to. The over 16500 UK residents who’ve opted for equity release in 2021 have received the best rates yet.
Are you wondering why low interest rates are so important? We’ll help you discover:
- If you’re already a plan holder but could be paying less.
- The importance of low-interest rates and how these will impact your family.
- The lowest possible rates on the market.
- What will affects the rates you’ll achieve.
Our team of experts has studied over 220 equity release plans by more than 28 plan providers, and we’ve done an in-depth analysis of equity release interest rates in 2021.
Are you interest to know what we found? Continue reading to find out!
What Are the 2021 Interest Rates?
Equity release interest rates are at an all-time low in 2021. More than 50% of lenders on the market are currently offering rates below 4%. This is a stark contrast to where we were 5 years ago; in 2016, you would have expected to obtain rates of around 6%. Now, some providers’ rates are easily around the 3% mark or even lower!
Top Tip: You’ll want to obtain the lowest possible rates. With a lifetime mortgage, the most popular type of equity release, interest is compounded over the years. The lower your rates, the less that will be owed to the lender from the sale of your home when you pass away or move into permanent care.
Some 2021 interest rates are as low as 2.3%, but later we’ll give you perspective to understand what affects the rates you can achieve.
Here are some currently low rates offered by a few of the TOP equity release providers:
Equity Release Loan-to-Value Table
|Age of the Youngest Homeowner||Standard Equity Release||Enhanced Lifetime Mortgage|
What Rates Could I Obtain?
By now, you’re likely asking what equity release rates you could achieve. Firstly, use our equity release calculator to determine the amount of cash that’s tied into your home. However, for your convenience, we’ve put together some case studies.
Case Study #1 – Couple aged 80 and 82
Property Value: £255 000.00
Client Information: Clients live in a flat and have no terrible health issues.
The Recommended Plan
- Lender: Just.
- Release: £123 760 + £6 288 cashback
- Interest Rates: 5.60% MER (5.75% AER)
- Lender Fees: £0 upfront & £0 completion
Case Study #2 – Single Retiree Aged 61
- Property Value: £640 000
- Client Information: The client lives in a house and has a life-threatening illness
The Recommended Plan
- Lender: more2life
- Release Approximately: £331 500
- Interest Rates: Roughly 3.12% MER (3.16% AER)
- Lender Fees: £0 upfront & £0 on completion
Case Study #3: Couple Aged 67 and 77
- Property Value: £551 000
- Property Type: Freestanding house
The Recommended Plan
- Lender Aviva
- Release Approximately £203 500
- Interest Rates: Roughly 3.51% MER (3.57% AER)
- Lender Fees: £0 upfront & £5 on completion
The Lowest Rates Available in 2021
The question is, how low can you go? Check these out!
- Pure Retirement 2.32%
- Legal & General 2.3%
- More 2 Life 2.9%
- Aviva 3.3%
Some of these lenders even have plans with fantastic features like a free valuation. Such special features can significantly lower your equity release costs!
6 Ways Providers Determine Your Interest Rates
The rates you can achieve are vastly determined by who you are, the value of your property, and other things that we’re about to divulge. Here are the 6 factors that impact your interest rates:
1. Loan Amount and Property Value
When releasing equity, you’ll be told the amount of cash that’s tied into your home, as per the value of your property.
Once you select the loan amount, your interest rates will be calculated based on your property valuation and the amount chosen vs the amount available.
2. Your Age
Your age plays a big part in the amount of equity you can release from your home.
In addition, the older you are, the lower the interest rates you’ll be entitled to.
3. The Condition of Your Health
This is where an enhanced equity release plan comes into play.
If you’re suffering from a life-threatening or severe illness, you’ll likely qualify for a plan that provides low interest rates to such individuals. You’ll need to fill out a form explaining your poor health.
Several diseases qualify, including:
- Heart Conditions
If this could be you, ask your financial adviser about enhanced equity release plans. Should you wish to, you can use your cash released to pay for advanced medical care.
4. Product Features
Not all plans are created equally.
It’s vital to study the underwriting and features of the different plans you consider. The market available to you might be impacted by lending criteria. This means that the plan provider will need to approve your property and personal details, so you might not have every single plan to choose from.
Look out for additional features, like a reserve facility or inheritance protection. With these, you’ll pay a premium that could come with higher interest rates. It’s up to you, along with the guidance of your financial adviser, to weigh out these pros and cons.
5. Your Marital Status
Did you know that in the case of some lenders, you won’t be eligible to unlock equity as an individual if you’re part of a couple? In addition, you can also request a joint equity release if this suits you best.
If you can, you might want to consider the oldest partner to release equity as an individual. However, what’s great about a joint plan is that both parties can stay in the home until they pass away or move into long-term care.
The equity release provider will consider the age of the youngest homeowner when working out your interest rates.
6. Potentially Your Credit History
In most cases, your credit history won’t impact your equity release plan, and some lenders won’t even request or do a credit check. This is because the loan is purely determined by the value of your asset (AKA your home), and you don’t need to pay back the loan in your lifetime.
A past Country Court Judgement or insolvency might deter certain lenders, but you should be able to find plan options to still qualify for an equity release scheme. Your interest rates might just be impacted.
Pro Tip: You can use your equity release money as a means to pay off your debt without having to sell your beloved home!
Understanding AER vs MER
Interest rates are quoted in 2 ways, AER vs MER.
What’s the difference?
MER – Monthly Equivalent Rate
Generally working out as lower, these rates are added per year and then divided monthly.
AER – Annual Equivalent Rate
These rates are added over a year.
These rates are accumulated annually or monthly, and then the balance owed will be paid from the sale of your house when you pass away or move into permanent care.
Fixed vs Variable Interest Rates
Equity release interest rates can come in 2 ways: fixed and variable.
Fixed interest rates are determined at the start of your plan and remain the same until it comes to an end.
Variable interest rates can increase and are usually in line with the Consumer Price Index (CPI). As per the Equity Release Council’s ruling, variable rates must have a cap and, therefore, cannot inflate disproportionately.
Historical Shifts in Interest Rates
Before the Equity Release Council’s formation in 1991, the market was fraught with dubious lenders who took advantage of older folks, leaving some crippled with debt.
Since the market is now regulated, rates became more standard and settled at a point. The rise in the market, more demand, and increased competitors have meant that the equity release rates started to drop in 2020 significantly, and even more so in 2021.
What’s great about taking out a fixed interest rate plan now is that even if rates rise, you’ll keep your low-interest rates for the rest of your life.
Who Can Help Me Find the Best Available Equity Release Interest Rates?
In order to find the best rates available for you, you must seek the advice of an independent financial adviser. Whole market advisers will have a holistic understanding of the entire equity release landscape, including current interest rates.
What Are the Lowest Possible Rates in 2021?
Record-breaking low rates between 2.3 and 2.6 have been available in 2021.
Will I Need to Make Monthly Interest Repayments With Equity Release?
When it comes to releasing equity from your home, you are not obligated to make any interest repayments.
You can do so if you wish to, reducing the amount of interest that’s compounded and paid back when you pass away or move into permanent care.
While releasing equity from your home can be a life-changing decision, your family can be left with little to no inheritance if your interest rates are too high.
With interest rates at a historic low, now’s the best time to release equity from your home. With an ever-shifting economy, who knows where these figures will go in the future.
Seek guidance from your independent financial adviser and shop around at various plan providers to find the lowest equity release rates available for you and your family. Finally, look at each plan holistically to ensure you’ve made the correct decision.