However, he agrees that equity release can be a viable solution for retirees looking to purchase their ideal property.
“Interest rates have come down dramatically compared to where they were three years ago. Our typical client is around 75 years old and we are securing borrowing rates well below 3 per cent on average,” Forsdyke says.
“Market leading rates have recently dropped back below 2.5 per cent, which means where the borrower chooses to allow interest to roll up, the debt will grow very slowly, doubling in size in around 25 years.”
Figures from Moneyfacts show a downward trend in the average equity release interest rate, from 6.20 per cent in January 2016 to 3.95 per cent in January 2021.
As well as more competitive interest rates, Andrew Kerry, financial solutions manager at StepChange, says product innovations mean clients can repay the interest on their lifetime mortgage rather than letting it roll up and increase their debt.
But according to more2life, many consumers and even some advisers do not realise that equity release is a viable way of funding a house move.
Kerry agrees: “This may be partly down to the marketing of equity release being primarily focusing on lifestyle choices, rather than the practicalities of moving home.”
While Kerry says equity release can be a viable option to enable consumers to find the right home for their later-life needs, he notes consideration should be given to the cost of maintaining a new property against the client staying in their existing home.
“It is also important to assess the requirements of the property for the long term,” Kerry adds. “Many consumers state that this is their final home move and a discussion needs to be conducted with the client to ensure that it will still be a suitable purchase when they are possibly affected by mobility or other health-related issues.”
This was the case for Healy. “It's a great idea in a situation like my client, where they have no one to leave their estate to. Equally even those with family, where they want to leave inheritance, can with some providers pay the interest each month and even some of the capital if they are in a position to do so.”
Healy also agrees there is a lack of awareness of the option to use a lifetime mortgage to fund a home move.
“I think the words ‘equity release’ make people think of just releasing equity from your current property. It’s something I share with local estate agents, as the more people that know, the more people we can help.”
Chloe Cheung is a features writer at FTAdviser
