Julia Crump, adviser in our Later Life Lending team, gives an insight into what is happening currently in the Lifetime Mortgages market.

Whilst lifetime mortgage rates are closely linked to UK Government 15 year gilt yields, they are nevertheless influenced by the Bank of England base rate. Following the decision made by the Bank of England’s Monetary Policy Committee to increase the base rate to 5%, our trade body, the Equity Release Council have had quite a bit to say, including the following observations:

People are having to adjust to the realities of a higher interest-rate environment in many aspects of their personal finances and the lifetime mortgage market is no exception. The decision to take a lifetime mortgage is very much down to suitability and timing and so some customers are biding their time to see what interest rates will do next, whilst for others it makes sense to continue with the process of taking out a lifetime mortgage as they need the monies now.

It is important to bear in mind that recent innovations in the lifetime mortgage market work in the customer’s favour by giving them options that keep costs under control, for example regular payments or partial payments that reduce the build-up of interest or reduced interest rates when their life expectancy is sadly reduced due to a health condition.

Homeowners who are feeling the pinch but have a present need have proceeded cautiously, with average loan sizes at their lowest since 2017 despite a 30% rise in house prices since then*.

Whilst the Equity Release Council has identified a dip in activity as the market adjusts to the higher interest rate environment, it is worth noting that lifetime mortgages still play an important role in improving peoples’ quality of life and financial security in many different ways. The most common uses of the funds raised currently include: paying for care at home, supplementing income to maintain lifestyle, divorce, the purchase of a new main residence, gifting an early inheritance (often as part of a wider inheritance tax planning strategy) or paying off an interest only mortgage. With so much volatility in the markets, it is more important than ever that borrowers get in touch with an experienced, specialist mortgage adviser to find out the options available to them.

*Equity Release Council website news, Q1 equity release market statistics (April 28th 2023)