Blog > UK equity release update: sub-6% rates return to the market

UK equity release update: sub-6% rates return to the market

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By Clare Yates • 29th January 2024 • 3 min read

Industry experts comment on interest rate trends

Written in line with our editorial policy.

There was good news for later life homeowners as 2023 drew to a close with equity release rates reaching their lowest level since April. Could a further drop be in store, or will we see rates start to settle? 

Whilst nobody has a crystal ball to predict exactly what will happen to rates this year, we can take a look at what industry experts are saying to see what could be in store. 

In an Equity Release Council article, Mark Gregory, CEO of Equity Release Supermarket expresses hope that rates will continue to remain on a downward trend for 2024. He notes that rates in January 2023 began at 5.99%, fell to 5.24% in April and then gradually increased throughout the second half of the year. By December 2023 interest rates had fallen to 5.28%.

Another article by the Financial Reporter suggests that rates are settling down at a lower level than was seen in 2023. Stuart Wilson, Chairman of Air Club writes: “As rates stabilise at lower levels demand is improving, activity levels are starting to move up, affordability becomes easier to achieve, which creates greater interest in the options available, and something of a virtuous circle is created.”

The drop in rates means there are now many equity release plans available to homeowners that have rates under 6%. The industry has also seen lenders increase their maximum loan-to-value (LTV), which means homeowners can potentially access more tax-free cash.

Read more about the latest equity release interest rates

When comparing rates, it’s important to remember that equity release rates work a little differently to other forms of lending. Rather than following the Bank of England’s base rate, they follow the trend of the 15-year gilt. So when gilts rise or fall, equity release interest rates tend to follow.

They are also typically shown as ‘monthly equivalent rates’ or MERs. This is different to the more common ‘annual equivalent rate’ or AER. The difference is that the MER shows the rate of interest added over the year then divided across each month. If you are comparing plans, be sure to check if the rates are MER or AER for a fair comparison.

It is important to remember that plans or providers offering the lowest rates do not necessarily make them the best fit for you. There are many different plans available with a range of options that could help you to achieve your financial goals. 

For instance, drawdown plans could enable you to access the cash you need over time while minimising the amount of interest you might otherwise accrue. This could save you potentially thousands of pounds over the life of your plan.

Help to find the best equity release rates

As equity release is typically a lifetime commitment, it’s important you take the time to make the right decision and seek specialist advice. It’s also important to gather quotes from different providers to ensure you’re getting a competitive deal.

Call us on 0808 178 3055 and we’ll arrange a free, no-obligation appointment from a specialist who will confirm your eligibility for equity release and look for the best rates from leading providers. If you’re unable to talk now, request a call back and we’ll call when it’s convenient to you. You can also get a quick estimate of how much money you could unlock from your home with our free equity release calculator.

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

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