Equity release has been a very hot topic in the financial world during 2018, and consequently in the wider world too. Every year more and more homeowners are choosing to enter into some form of equity release program.

This can be an especially attractive proposition for those who are not in a position to re-mortgage their home to raise cash perhaps due to age or lack of a high regular income. (Although some people simply wish to make their valuable property wealth work for them.)In 2014 around £1.38bn was released through these schemes – with customer numbers up 13% on the previous year, in 2015 this figure was around £1.6bn, but in 2017 this figure had risen dramatically to £3.06bn! (Stats from the Equity Release Council.) There’s no doubt that the interest in this form of borrowing is growing, but the market is very open to fluctuation.

Pay attention to interest rates – they are crucial
There have been points when new providers enter the market and cause the interest rates to dip as a result of the new competition, but they are very volatile, and capable of shifting both rapidly and dramatically. In a couple of years they have gone from an average of 4.6% to nearly 6%, only to drop again to around 5.2%.

Rates can drop if several new lenders increase the competition, but it’s also common for several lenders to increase their rates at the same time, sometimes more than once in a year. Current stats are mostly between 5-6%, depending on the type of scheme chosen.It’s common sense that borrowing money means paying interest, and that is something anyone would expect on a regular mortgage, so why are these rates so important? There are two reasons. The first is that they are twice that of the average mortgage a younger lender pays, and consequently the second is that in many cases the total being paid back (eventually) could easily wipe out any surplus equity which would pass to beneficiaries.

Calculate the cost of roll-ups
Lifetime mortgages where no repayments are made until after your death, when the property is sold and the loan repaid, are known as ‘roll-ups’. The interest is added to the amount borrowed, and in turn, interest is paid on that new amount. This dramatically increases the final total owed. For example, someone borrowing £45,000 for 25 years at a rate of 5% would owe £152,387!

This is why getting the best possible interest rate matters, or, if you are concerned, choosing a different kind of equity release scheme such as a drawdown mortgage, so interest is only added to sums you actually borrow in stages. Using a specialized site such as ‘What Mortgage’ is helpful as it also regularly features up to date comparison charts, making it easier to see which lenders are offering the best deals.

Look for transparency
The government has made serious efforts to regulate the entire equity release market in the last couple of years, responding to the needs of consumers who were sometimes, initially at least, vulnerable to being exploited in what was a suddenly popular and blossoming arena. Consequently, nowadays financial advisors who deal with equity release schemes must be properly trained experts in the field. Wherever you look for guidance on getting the best equity release rates in 2019 chances are there will be a link (or two) to recommended advisors. A decent article will mention their qualifications and suitability for that role upfront, and make any connections between themselves and those advisors crystal clear. The very best equity release lenders are professional enough to state that their product may not be right for you, and encourage you to seek independent financial advice.

Information and comparison sites
Go Compare is a good example of a company which dabbles in various financial arenas, being best on perhaps for checking out the best insurance deals. They also offer informative blog posts about interest rates, and have a clear disclaimer which identifies any associated products and services being promoted. Equity Release Supermarket offers more detailed explanations of different types of equity release schemes, along with easy to follow comparison charts and solid advice to consult a financial planner before committing to anything.The infamous Which? site regularly outlines deals on equity release schemes, and promotes free financial advice from their mortgage advisors on whether or not a different form of borrowing would be more to your advantage, while specialist sites like ‘money.co.uk’ also compare deals between a range of providers.

Monitor quality newspapers
Broadsheets like the Telegraph and The Times have good financial sections which report current news on all aspects of equity release. Their reports offer some intelligent insights into what is happening and also what is possible in the future, making them a good source of information, as well as food for thought. Readers who are willing and able to take the insights and work with them can pick up some excellent ideas.

For example, one article on 2019 rates mentioned that rates for equity release schemes are generally fixed at the outset, with no option for a variable rate plan, as would be expected with a regular mortgage. There’s no reason why, if you find this more appealing, you couldn’t ask providers if this is something they offer, or are prepared to introduce it.

Compare like for like

When looking at 2019 interest rates, either on a lender’s site or on comparison charts, it is vital you are comparing rates for the same kind of equity release scheme, as they can vary considerably.There are several ways to find out about the best rates for equity release schemes in 2019, but whichever providers you choose to pursue, always be prepared to ask questions and to know what you want before you get started.

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