We save readers £1m by sparking an equity release switching revolution

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Money Mail readers will save more than £1 million after our stories prompted a surge in homeowners switching equity release deals.

We revealed last year how most equity release borrowers were unaware they could save tens of thousands of pounds over the lifetime of their loan by moving to a cheaper interest rate.

Since then, switching numbers have soared to record levels — with industry insiders saying Money Mail’s articles opened the floodgates.

Big savings: The average customer moved a balance of £135,529 from an interest rate of 5.1% to 3.6%. It means that in five years they will have saved £9,669 and £26,996 after ten

Big savings: The average customer moved a balance of £135,529 from an interest rate of 5.1% to 3.6%. It means that in five years they will have saved £9,669 and £26,996 after ten

Just 1,930 equity release remortgages took place in 2020, according to analysis by broker Key. But by the end of 2021 remortgaging had risen by 174 per cent to an all-time high of 5,295.

The average customer moved a balance of £135,529 from an interest rate of 5.1 per cent to 3.6 per cent. It means that in five years they will have saved £9,669 – and £26,996 after ten.

Broker Age Partnership says readers who contacted the firm as a result of reading Money Mail’s call to arms will save £1,013,560 over the life of their loans.

Equity release: How it works and advice

This is Money has partnered with Age Partnership+, independent advisers who specialise in retirement mortgages and equity release. 

Age Partnership+ compares deals across the whole of the market and their advisers can help you work out whether equity release is right for you – or whether there are better options. 

Age Partnership+ advisers can also see if those with existing equity release deals can save money by switching. 

>> Find about equity release and get a free no-obligation guide   

Andrew Morris, senior equity release adviser at Age Partnership, says: ‘Since Money Mail highlighted the option to switch equity release plans we have seen a big increase in homeowners asking for a plan review.

‘Although not everyone will be able to change plans, without having a review homeowners could miss out on the chance to save tens of thousands of pounds over the life of their loan by moving to a lower interest rate.’

Baroness Ros Altmann, a former pensions minister, says: ‘I am delighted to see that the Money Mail campaign has helped so many people. 

‘Equity release is often a minefield for borrowers so any action that helps people get better value is so important, especially with the rising cost of living draining people’s resources.’

Equity release loans allow older homeowners to unlock tax-free cash from the value of their property. The loans are available to borrowers aged 55 and over and do not require monthly payments. 

Instead, the interest is rolled up on to the loan and repaid when the last surviving homeowner moves into long-term care or dies.

Switching to a cheaper interest rate lessens the damaging impact of compound interest, as the higher the rate, the faster your debt will grow.

However, homeowners whose equity has been eroded by interest charges or those who will incur costly early repayment charges to exit their plan may find that they are unable to remortgage.

Before 2004, exit fees were uncapped. And even since then penalties of up to 25 per cent of the original loan can still apply.

Around 300,000 homeowners have equity release mortgages, according to trade body the Equity Release Council.

A s the pandemic drove property prices sky-high last year, a record £4.8 billion in equity was unlocked from homes –– equal to more than £13 million a day.

Switching to a cheaper interest rate lessens the damaging impact of compound interest, as the higher the rate, the faster your debt will grow

Switching to a cheaper interest rate lessens the damaging impact of compound interest, as the higher the rate, the faster your debt will grow

Borrowers who took out loans more than five years ago are likely to be paying in excess of 6 per cent.

But as the popularity of equity release has soared, rates have tumbled due to a combination of economic factors and increased competition.

The average rate is now 4.22 per cent, according to finance experts Moneyfacts. And homeowners who only want to take out a small amount of equity can pay less than 3 pc.

But average rates have crept up by 0.3 basis points over the last 12 months, so homeowners need to act fast. James and Ann Smith, from Halifax in West Yorkshire, switched from a 6.13 per cent rate to 3.72 per cent after reading about falling rates in Money Mail.

The couple, who are both 75, took out a £78,000 equity release loan six years ago to carry out home improvements after buying their three-bedroom semi-detached house.

Retired IT manager James says: ‘We read that equity release rates had fallen and it was worth shopping around for a cheaper deal so we called Ocean Equity Release, quoted in the article, and asked for a review.’

James and retired personal assistant Ann withdrew a further £17,000 to make their home more energy efficient by adding solar panels and a ground source heat pump. 

If the couple had remortgaged without taking out extra cash, the rate switch would have saved them £44,353 over the life of the loan even after they paid an exit fee of £16,413.

James says: ‘I’d say to anyone who has equity release that it’s certainly worth contacting an adviser for a review, but the penalties for switching can be high.’

Since our story, the Equity Release Council has issued new guidelines to brokers and advisers stating they must encourage borrowers on their books to review their deal regularly.

Stuart Powell, managing director of Ocean Equity Release, says: ‘We’ve noticed a huge increase over the past year of people inquiring about switching rates but more needs to be done to raise awareness of equity release remortgaging.

‘Many advisers offer a free review with no obligation to use their services.’

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