are rising for borrowers — up to an average of seven per cent this year compared to four per cent in 2022, making it more expensive.Equity release is a valuable tool for access to funds - but has the potential to be costly in the long runExperts warn this now puts homeowners in greater danger of wiping out the value of their home, meaning they have less cash to pass on to loved ones.IT lets homeowners convert some of their home’s value into cash — effectively a loan.
Jim Boyd, chief executive of trade body the Equity Release Council, said: “With the higher rates that we’ve seen over the last few years, you find that customers typically have one pressing need such as repaying their mortgage and then they choose to take out a little more, to gift or improve their lifestyle in retirement.RISING interest rates mean your home’s value will deplete more quickly, especially if you choose not to pay interest on your loan.
Beware of repaying too much, as it could trigger an early-repayment penalty, which can be as high as 25 per cent of your original loan balance, though it can decrease the longer you have your loan. SVRs are generally higher than other types of mortgage, so if you're on one then you're likely to be paying more than you need to.Although you are likely to incur a hefty penalty for repaying your loan early, you could end up paying less interest overall by switching deals.All its firms must stick to a set of standards which you can look up on equityreleasecouncil.com.