Mark Gregory, founder and CEO of the Equity Release Supermarket, reflects on 2023’s rates and considers what might be in store for 2024.

Equity release interest rates follow the trend of the 15-year gilt, rather than the Bank of England base rate. Gilts are UK government bonds, issued to help finance public spending. If gilts rise, equity release interest rates follow, and vice versa.

The table below highlights how the best product interest rates have changed during 2023, alongside gilt rates* for comparison.

Equity release rates are expressed as monthly equivalent rates or MERs which shows the rate of interest added over the year but divided over every month.

As you can see, January 2023 started out at 5.99% with rates decreasing to 5.24% by April. With greater economic uncertainty interest rates and gilts increased for the rest of the year until this November, reaching 6.10%

In December we have started seeing a sharp decrease in both gilts and interest rates and the lowest rate is 5.28% and we hope this trend will continue in 2024.

Although average rates are currently above 6% there are many plans available below this. We are also seeing lenders increase their loan-to-values, meaning the amount that can be borrowed is also increasing.

Does the interest rate matter?

Yes of course. The rate will determine the interest that’s applied and if the customer chooses not to make any repayments, it will determine how much they can pass on to their beneficiaries when the plan ends.

But people should not assume that the product with the lowest rate is necessarily the right one for their personal circumstances. There are hundreds of equity release products on the market, each with different features.

Two of the most basic features are lump sum and drawdown plans.

As the term implies, a lump sum is where the customer takes out the equity in one go. However, if a customer takes out a drawdown plan they might pay a slightly higher interest rate but they only take out what they need at that time, with the option to drawdown more in the future, at the prevailing rate.

There are hundreds of great advisers listed in the Council’s member directory, including our own. People can also use our comparison tool, which helps them research the whole later life lending market, based on their personal circumstances.

For more information visit www.equityreleasesupermarket.com

*Source: Marketwatch.com – average 15-year gilts: January to December 2023

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