While the chaos of the mini-budget seems to have stabilised, some things have remained the same such as the cost-of-living, double-digit inflation and Bank of England interest rate increases. The demand for our support to our customers to find the right mortgage and protection solutions to help their circumstances has also remained the same. And in good times and in the more challenging times, we continually assess the market looking for the best products available.
For example, as an independent mortgage broker we can report that our network has indicated that over 13,000 plans are being used to release more than £1.5 billion of new lending in the third quarter of 2022. These equity release products have allowed older homeowners to support their families (20% of people), repay unsecured debt (31%), manage existing mortgages (24%) and rebroke current products (17%) as they focus on shoring up their finances.
Having focused on using equity release to meet needs during the pandemic, the third quarter of the year saw a slight increase in people using proceeds for more discretionary purposes. For example, a reported 3% YOY increase to 40% for people using equity release for home/garden improvements and a 7% increase to 16% for those using the funds to pay for holidays.
Reassuringly the products now available for equity release are the most flexible we have seen, with almost two-thirds (63%) allowing ongoing interest repayments and all new plans allowing ad-hoc repayments within lender criteria. And the flexibility of equity release products continues to go from strength to strength, alongside standard benefits of equity release such as no negative equity guarantee, no affordability checks, no mandatory monthly interest payments, fixed rates for life and a guarantee of tenure.
The flexible nature of lifetime mortgages and the safeguards provided means that not only can people make ad hoc repayments, service interest and benefit from the no-negative equity guarantee but rebroke in future. For those coming off a fixed rate deal onto their lender's standard variable rate (SVR), struggling to make an already stretched income cover rising utility costs or watching most of their income disappear on debt repayments, these products can be a lifeline.
Several products and options are available, and not all products are suitable for each circumstance. Such as, at the end of Q3 2022, the average equity release interest rate was 4.54% which is still historically low; however, interest rates continue to react to Government uncertainty. Against this backdrop, there is no doubt that for some, downsizing or delaying making a decision or choosing other funding sources will be the right option, but for others, equity release will be the right choice. As specialist later life lending advisers, we provide highly personalised recommendations aligned to individual circumstances and goals and focus on finding the right option for your circumstances.
Releasing equity is a big decision, we’re here to help you make the right choice for you. Taking out a lifetime mortgage can impact your tax position as well as your entitlement to means-tested state benefits such as pension credit and universal credit. If you wish to discuss the options available to you, please get in touch. Our team are here to help our customers find the right option for their individual circumstances.