Equity release customers who take out lifetime mortgages will be able to shrink the size of their loans further after the Equity Release Council (ERC) introduced a penalty free partial repayments guarantee.

This guarantee is already offered by some lenders but from 28th March 2022 it will now be available as a standard feature in all products which meet the ERC’s standards. It means new customers can not only reduce their borrowing but also offset the roll-up interest without having to make further commitments to repayments.

The council said the guarantee has been introduced to mark 30 years since consumer protections were first established by its predecessor Safe Home Income Plans.

David Burrowes, chairman of the ERC, said: “Updating our standards to lock down the ability to make partial repayments on lifetime mortgages – an innovative feature that has become increasingly common in recent years – provides flexibility for consumers and ensures the sector continues to evolve to meet changing demographic needs.

“As recent years have reminded us, people’s circumstances can change and customers who find they can use earnings, savings or an inheritance to reduce their borrowing in later life will be able to do so without incurring early repayment charges.”

The ERC said 2021 saw the equity release sector return to growth for the first time in three years. Over 76,000 new and returning customers took advantage of the wide range of equity release plans on offer.

What is a lifetime mortgage?

People aged 55 or over who own their home can boost their income later in life by releasing some of the equity they have in the property. A provider will offer you a tax-free loan secured against your home which is paid off when you die or go into long-term residential care. In the case of a joint application the sale happens when the last-named person living in the house dies or moves to long-term care.

A lender may offer up to 60% of the value of your home. The older you are, the more you can borrow. You are not required to pay the loan off during your lifetime unless you want to sell your property or remortgage with another provider for a better deal.

:: Use our Equity Release Calculator to work out how much cash you could release.

It is important to take expert advice on equity release before deciding whether it is right for you. Contact us to find out more from one of our highly trained advisers.

*Equity Release Council Market Report Autumn 2018