Equity release rates stabilise and LTVs increase

Promising news for later life borrowers

Written in line with our editorial policy.

The Equity Release Council’s Winter 2024 Market Report reveals that interest rates on lifetime mortgages are stabilising after a period of sustained rate increases. Consumers are also able to borrow more, with lenders increasing their loan-to-value (LTV) levels.

According to the Equity Release Council, equity release interest rates have settled down in the market. According to their latest market report, the average rate for new lifetime mortgages hit a low of 6.31% in September 2024. This is better news for borrowers compared to rates of over 7% seen in 2023.

Additionally, even with the ups and downs of the economy, loan-to-value (LTV) ratios for lifetime mortgages at age 70 are heading back towards pre-pandemic levels. This is great news for older homeowners, especially those needing to release equity to clear their interest-only mortgages. Lenders are now able to offer larger sums, giving homeowners greater flexibility to access the funds they need.

Furthermore, according to the Council’s analysis of AdviseWise data, there were 212 more new equity release products launched than withdrawn between August and October (4,083 launches compared to 3,871 withdrawals).

Longer lives, fewer mortgages for older homeowners

The UK’s population of people aged 56 and over has grown significantly, increasing by 31% since 2005 to almost 21 million. But while the number of older adults has risen, overall mortgage approvals have gone in the opposite direction, with fewer older borrowers securing loans.

Back in 2005, there was one mortgage completion for every 91 people aged 56+. By 2023, that had dropped to just one completion per 246 people. The Equity Release Council’s analysis of regulatory data reveals that mortgage completions for this age group fell by 52%, from 175,260 in 2005 to only 84,576 last year.

This decline may be linked to stricter mortgage lending rules. As people age, it can become harder to meet the affordability criteria for conventional mortgages, particularly for loans extending into retirement. On top of this, older borrowers may face limited product availability, with fewer options like interest-only standard mortgages, making it more challenging to find suitable deals. 

This sharp drop in mortgage completions has happened despite big strides in product innovation for older homeowners. Newer options, like flexible lifetime mortgages with built-in payment plans, interest-only equity release plans and a range of retirement-focused mortgage products, have become available. 

Despite this, the numbers suggest there’s still a lot of unmet demand among this cohort. As the equity release market continues to recover, finding ways to bridge this gap will be essential.

“No denying the giant strides which have been made in equity release”

Speaking about the latest figures, David Burrowes, Chair of the Equity Release Council, said:

“While lending volumes may be subdued for now, there is no denying the giant strides which have been made in equity release product design and distribution, advice and public perceptions in the post-regulation era.

“We know the current recovery will be a gradual process with no overnight return to the £6bn+ market of recent years. At the same time, the potential is there to go far beyond this high watermark in the future, and it’s important we turn this reset period into a positive.

“Property wealth has long been one of the most significant assets available to UK households. Advances in lifetime mortgage product design have made it significantly more attractive to access and are likely to be seen in years to come as a major milestone in bridging the gap between residential homeowner mortgages and the later life market.”

Source

Equity Release Council data: Unmet later life lending demand evident as equity release market signals recovery. Equity Release Council. Accessed 27 January 2025.

About Clare Yates. With over a decade’s experience writing about later life financial planning, Clare offers a wealth of knowledge about equity release, pension annuities, wills, LPAs and more. When she isn’t writing, Clare likes to spend her time baking and going on walks with her husband, two children and their rescue dog. Follow Clare on LinkedIn