"Since this feature was embedded into Equity Release Council standards, we have seen people’s usage grow and their interest savings add up."
The number of voluntary penalty-free partial repayments made by equity release customers grew by 48% last year, according to the Equity Release Council’s latest report.
More than 90,000 borrowers reduced their loans by £102m in 2022 by making 190,374 partial repayments throughout the year, 48% more than were made in 2021.
By reducing their loans in this way, these customers stand to save a further £116m in future interest costs over the next 20 years.
Making voluntary penalty-free part repayments was made a compulsory feature for all products that meet Equity Release Council standards from 28 March last year.
The report also shows equity release activity reached record levels in H2 2022, despite the after-effects of the mini-Budget in September prompting a slowdown in Q4.
Since then, product pricing has fallen gradually over the last five months to an average of 6.23% at the start of April 2023, with advertised rates as low as 5.52%.
Product numbers have edged back towards 200, although maximum LTVs have been tightened from 47.0% in August 2022 to 38.7% in April 2023.
David Burrowes, chair of the Equity Release Council, commented: “Modern equity release is an incredibly versatile product. People can choose whether they want to make repayments without fear of losing their homes, and since this feature was embedded into Equity Release Council standards, we have seen people’s usage grow and their interest savings add up. By making modest repayments when they can afford to, customers can benefit from their property wealth in the here-and-now while reducing their overall borrowing costs by tens of thousands of pounds.
“A nation where so many pensioners struggle to afford a moderate standard of living simply cannot ignore the potential for property to help bridge the gap. Equity release could make a decade of difference or more to someone whose pension income might otherwise only cover a basic lifestyle.
“The option of turning property wealth into pounds in their pocket has never been more important for consumers and our ageing society. As the market recovers from the economic shocks of late 2022, it is vital that people consider the role of their homes in covering the costs of later life.”
