The number of voluntary penalty-free partial repayments made by equity release customers soared 48% last year, according to the Equity Release Council.
Its Spring 2023 Market Report showed more than 90,000 equity release customers reduced their loans by £102 million in 2022 by making 190,374 partial repayments through the year.
The reduction in loans will save customers a further £116 million in future interest costs over the next 20 years, according to the Equity Release Council.
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. It means customers can make repayments while they are still alive, reducing their interest costs and preserving more property wealth for future use or to pass on as inheritance.
The Equity Release Council said its report had shown homeowners improving their living standards by drawing on property wealth. According to its analysis, the average single pensioner’s income falls short of what is needed to support a minimum standard of living, but equity release can help them to afford a moderate lifestyle for 12 years or five years of living in comfort.
The report also showed that equity release activity reached record levels in the second half of 2022.
David Burrowes, chair of the Equity Release Council, said: “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.”
Burrowes added: “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.”
