Low Rates Driving “Stampede” For Lifetime Mortgages

There has been a “middle class stampede” towards lifetime mortgages among older people driven by lowest lifetime mortgage rates, according to a mortgage broker.

Plymouth-based firm Responsible Life unveiled research showing that the number of older homeowners using lifetime mortgages to release equity has risen by 30 per cent over the last year. This happened at a time when the base rate reduced to a record low of 0.1 per cent, meaning savings interest is not a reliable source of income but mortgages were cheap.

According to Responsible Life, the average amount generated per equity release arrangement has risen by 31 per cent year-on-year, from £86,000 to £112,700.

The report noted that with lifetime mortgage rates falling by half in recent years, below three per cent in some cases, older people are “cottoning on” to the possibilities this presents for them.

Indeed, people looking to take advantage of the possibilities on offer may want to contact a remortgage broker in London to see what opportunities they may have.

A notable feature of the use of such mortgages has been the relatively high value of the homes on which they are secured. The typical property in this category is worth £487,000, nearly twice the UK average of £256,000. This was 19.4 per cent higher than a year before, well above the annual rate of house price inflation of 10.2 per cent.

Part of the increase in value is due to the fact that the second most common use of the released equity funds is spending on home improvements, raising the value of the home further and ensuring that it can raise a higher sum when it is eventually sold.

Steve Wilkie, the executive chairman of Later Life, said the popularity of spending equity release cash for this reason came at a time when a “home improvement frenzy” has been taking place, with people seeking to create more space at home during lockdown.

He added: “Wealthier homeowners have cottoned on to how rates have come down and now see lifetime mortgages as an affordable way to improve their standard of living in retirement.”

All this, Mr Wilkie reflected, marks a sea change in how lifetime mortgage are used compared with just a few years ago. He concluded: “Gone are the days when they were considered a product of last resort. That couldn’t be further from the truth now.”

The Monetary Policy Committee stated that it has no plans to increase the rates “at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the two per cent inflation target sustainably”, a statement that suggests the environment that has encouraged the increased use of lifetime mortgages is set to persist for a long time yet.

For more information about any of our services, or if you have any questions about lowest lifetime mortgage rates, get in touch by calling us on 0203 3939 222.

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