Property News

Increasing competition in equity release market - 15/05/2006

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Pensioners seeking equity release as a retirement product have been told they should shop around for it if they wish to get the best deals.

As equity release becomes more generally accepted among the industry and consumers alike, the amount of competition on the market is increasing, providing a range of possible interest rates.

MoneyExpert claims that the difference between the lowest and highest rates for providers is 3.2 per cent, with the average APR currently 6.95 per cent.

As a consequence, those shopping around for deals could be in line for saving considerable sums of money.

Sean Gardner, chief executive of MoneyExpert, commented that the spread of interest rates has a major effect on the amount of interest a homeowner will pay".

He said "someone releasing £50,000 from their home would pay annual interest of £4,450 at 8.9 per cent, compared with just £2,850 at 5.7 per cent and £3,477 at the average 6.95 per cent".

"Therefore those on the highest rate will be paying £1,600 more in interest than those on the lowest rate."

Around £1 billion in cash was released from the homes of retired people last year, as competitors capitalise on growing demand for the product.

Recent research from Datamonitor suggested that pensioners are capitalising on increasing house prices by using their house as a source of income.

It added that people aged between 50 and 60 currently hold £542.6 billion of home equity and forecasts that this will rise to £1,425.4 billion by the time they retire.

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