Equity Release interest rates last for different amounts of time, but what is the market standard?
Most equity release interest rates are fixed-for-life from application completion (money is released from the lender). Before completion, interest rates are only secured for short periods, typically 21 days from the illustration (quote) and 42 days from the offer. However, this can often be extended up to 84 days.
There are several things to consider to know how long your equity release interest rate will last. Often, you will find differences between plans offered by the same lender.
It is vital that we explore how long you will likely have at different stages of your equity release.
In this guide, you will learn:
In this guide, I will focus on the most common type of equity release, lifetime mortgages.
Most equity release quotes (illustrations) will last at least 14 days. Some lenders will offer 21 days on quotes from the date they are produced. However, with most further advances (when you borrow additional funds), the rate is only guaranteed once the offer is issued.
When I refer to a quote, I specifically refer to a Key Facts Illustration (KFI), which your equity release advisor requests from the lender using your personal information.
Any marketing material that you receive from an equity release advisor without a KFI will not have its rate secured.
What is a KFI?
A KFI is a 17-section document which fully explains lifetime mortgages and the specifics of your product. All equity release lenders are required to produce their illustrations in the same format, which makes it convenient to compare quotes.
Your KFI will include the following:
- Loan amount
- Interest Rate
- Plan Features
Depending on which product you have applied for, the interest rate is secured for differing amounts of time.
Most commonly, I expect the interest rate to last until 14 days from when the interest rate changes in the market (instead of when your advisor creates the KFI). So, during some times of the year when interest rates remain stable, they could last for weeks or even months.
Although this is the most common structure, some products' interest rates will last for 21 days from when your advisor creates the KFI rather than from a change in interest rate. This is common for plans from More2Life, Pure Retirement, Royal London, and Aviva.
It should be standard practice for your equity release advisor to check interest rates on illustrations they have given you regularly, but I cannot speak for all firms other than Money Release.
To get your personalised Key Facts Illustration, speak with one of our qualified equity release advisors by calling us on 0207 158 0881.
Almost all equity release interest rates are fixed-for-life, which will always stay the same on your initial release amount until you repay your equity release.
However, any extra money you release in the future (either from a reserve facility or further advance) will have a new interest rate. These will be at the prevailing rate and fixed for the plan's remaining life.
If you borrow extra money, the interest rate on previous releases will always remain the same.
Although over 99% of equity release interest rates are fixed-for-life, one lender did offer plans with variable interest rates. With variable-rate plans offered by OneFamily, the interest rate is reviewed every December. We will explore this later in this guide.
To fully secure an equity release interest rate, the application must be complete, and the lender must lend their funds.
However, you can secure a rate at different points for different periods.
The first (which we have already looked at) is when a Key Facts Illustration is issued.
The second is when a formal mortgage offer is issued from the equity release lender.
Following your recommendation meeting with an equity release advisor, if you choose to proceed, an application can be submitted to the equity release lender.
The lender will instruct a surveyor to value your property and check that it meets their security requirements.
Following property underwriting, if acceptable, the equity release lender will issue a formal mortgage offer.
The offer that the lender provides will have a minimum interest rate "locked" period, where it cannot change. Most commonly, this is 42 days from the time the offer is issued, but it does vary from product to product, with some lenders giving up to 90 days.
42 days should be plenty of time to complete the equity release process, but some complicated cases can take a little longer.
So, do you lose the interest rate if the equity release offer expires?
It depends on the lender and product you applied for. Some lenders will offer an extension if completion is within sight (a few days more); others will provide an extension of many more days, for example, a further 30 or 42. The extension will prolong the interest rate by an agreed time.
Let's look at the largest and our most recommended lender, more2life and see how their six product lines differ.
||Offer extension info
||A further 30 days
||A grace period may be applied when setting completion
||A further 42 days
||A further 42 days
||A further 42 days
More2Life are a great example of how the offers last for different lengths of time depending on the product. Most products follow a similar length to the ones above, with the longest offering from Aviva at 13 weeks (91 days).
To find out exactly how long an interest rate will last for you, you would need to be recommended a product by a qualified advisor. Contact us on 0207 158 0881 for a free, no-obligation consultation.
A few outcomes could come about if your equity release interest rate expires, and it also depends on how close your case is to completion.
Your KFI expires:
If your KFI expires, your equity release advisor must request a new illustration. Unfortunately, there is no way to extend a KFI interest rate past its expiration date.
The new KFI will be offered at the prevailing rate available.
Your offer expires:
If your offer expires, your advisor/broker can apply for an extension to prolong the interest rate. Most lenders will extend the offer long enough for your case to be complete; however, if your case is not near completion, some will and others won't.
Generally, if interest rates are increasing, lenders will be less likely to extend offers for long periods.
If the lender doesn't extend your offer, a reoffer will be created at the prevailing interest rate.
At this stage, your advisor will search the rest of the market to re-evaluate if a more suitable product with a lower interest rate is available.
They will then discuss with you your options and re-issue their recommendation.
Your equity release advisor will liaise with the equity release lender to request an extension to your mortgage offer.
They will review how close your case is to completing and movements to interest rates in the market before making a decision.
If your offer is extended, the equity release lender will let your advisor and their solicitors know the new expiry date. If not, they will issue a new mortgage offer at the prevailing market rate.
Equity release valuations last six months from the date the valuation takes place. In changing property markets, this can be reduced to three months, at which point they would carry out a desktop valuation.
If the valuation expires, the lender will require another valuation by the surveyor. Depending on market conditions, it could be a drive-by valuation; however, it could be another physical survey of your home. If property prices have increased in the last six months, it will be reflected in their valuation.
Lenders usually provide one free valuation, and if you need another, it will come at an extra cost. This is paid upfront, unlike most equity release fees. Typically, a re-inspection fee will be between £75-125.
Although uncommon in the market, OneFamily offered a variable interest rate lifetime mortgage.
Although the interest rates are variable, they are "collared and capped" - they have an upper and a lower limit. This meets the Equity Release Council product standards.
With OneFamily's variable rate lifetime mortgage, the interest rate is fixed for a year at a time. The lender reviews the interest rate every December, and the change will be based on a movement in the Consumer Price Index (CPI).
Note: CPI measures the overall change in consumer prices based on a representative basket of goods and services over time.
OneFamily withdrew from the market in 2022; however, we could see their return in the future.
If you have further questions, why not speak with one of our qualified advisors?
Call us on 0207 158 0881 or use our online form to book your FREE consultation.
While a qualified equity release advisor has written this guide, it is not intended to be used as financial nor legal advice and should not be relied upon.
To understand the full features and risks of an Equity Release plan, ask for a personalised illustration.
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