Low interest rates on equity release products are driving more people to enquire about switching plans, specialist adviser Bower Retirement has said.
In a recent study the firm found more than half of advisers had seen a rise in clients looking to move their existing deal to a lower rate. About 12% had even reported a 'substantial increase' in interest in equity release from customers looking for lower rates.
Rates on equity release products have been pushed to historic lows in recent years as competition in the market among existing and new lenders heated up.
According to Bower, average rates are currently around 5.66% after having fallen almost 1% in the past three years, while the number of plans available nearly trebled over the same period. Some lenders are offering deals for as little as 4.3%, Bower said.
Chief corporate officer Andrea Rozario said: "Increased competition in the market with new lenders such as Legal and General and OneFamily launching has meant rates have fallen significantly as the market has grown.
"That is reflected in the growing interest in switching plans but it is vital that customers considering moving get independent advice as any savings from lower rates need to be balanced against any early redemption charges or other costs."
There is no doubt equity release has grown exponentially in recent years. In November 2016, the market reached £570m, the highest quarterly value on record. The Equity Release Council forecasted it would exceed £2bn for the first time in 2016.
And advisers are keen to maintain the momentum. About 78% of advisers questioned by Bower said new lenders coming into the market would be the best way to maintain momentum.
Additionally, advisers would like to see more product innovation, with one in three calling for more retirement lending while the same number said further rate cuts would be the best way to continue market growth.
Chase de Vere certified financial planner Patrick Connolly said equity release was still a niche product for many, who see it as a last resort.
"That said, the market is developing, and with so many people having so much of their wealth tied up in their homes, it is a market that has to continue to develop and grow in the future," he said.
He added: "The first and foremost question is: is equity release the right route to take? If the answer is yes, then there is an argument for customers to lock themselves in at rates that are very competitive to what we've seen, and may well be competitive to what we get in the future."
The chairman isn’t answering his email
Reforms not enough
An economic cocktail
To encourage consumers to shop around
Will report to Pat Shea