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Rate rise won&#39t have adverse effect on equity release, says KRS

Key Retirement Solutions says the Bank of England base rate rise should not have an adverse effect on the equity release market.

Colin Taylor, managing director at KRS, says: “Whilst we have recently seen the Bank of England base rate increase on four separate occasions over the last few months, we have actually seen interest rates for equity release plans come down during this period. This is because of increased competition from more product providers entering into the equity release market.

“We believe that the plan providers will not be able to absorb a further increase and that they will pass on the full quarter of a percent to the consumer.  However, we believe that this will not adversely affect the equity release market as a whole. Indeed, if property prices now start to plateau we may now actually see the popularity of reversion plans start to increase and assist in further expansion of the market.”

 

He adds: “As most equity release mortgages are taken out at a fixed rate of interest, this latest increase is not likely to affect the majority of equity release planholders. However some banks and building societies will lend to the over-60s on an interest only basis, and it is likely that these people will be affected and see an increase in their monthly repayments.  They will not witness any change during the fixed rate term placed on the mortgage, but a full 1% increase during the last six months means that those people now currently paying at a variable rate will be affected.”

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