Rising interest rates are pushing up costs for those unlocking property wealth, with equity release rates now at their highest level in six years.

The average rate on equity release products is currently 5.63%, according to data from financial website Moneyfacts.co.uk, the highest it’s been since August 2016, when the average rate stood at 5.76%.

Despite rising rates, the equity release market is booming – the first three months of 2022 saw over 23,000 customers release a combined £1.53 billion worth of wealth from their homes, the busiest quarter ever recorded.

Why is equity release so popular?

Research from the Equity Release Council, the trade body for the equity release sector, indicates that most of the people releasing equity from their homes are choosing to take the money through a drawdown plan, rather than as a lump sum.

This suggests that customers may be looking for more of a regular income stream rather than a large one-time payment, which could well be a result of the ongoing cost of living crisis, which has left many looking at ways to cover higher bills.

A recent study by LV= shows retirees facing an increase in living costs of almost £2,000 a year thanks to the crisis, and over one in 10 retirees are still paying off their mortgages when they retire.

These factors – clearing debt, boosting income and funding retirement – are among the main reasons why equity release continues to be a popular choice for homeowners aged 55 or over, even with interest rates on the rise.

Rachel Springall, finance expert at Moneyfacts, said of equity release: “It is imperative [consumers] seek independent financial advice to ensure it’s the right choice for both them and their relatives.

“Homeowners may find they can avoid pulling wealth out of their property altogether, but if it is the most appropriate choice then they must be conscious of how equity release works and its resulting impact.”

Learn where you can find advice in our guide Where can I find equity release advice?

Find out more about equity release

If you’re interested in equity release or want to find out more, Rest Less provides plenty of resources which may help. Our guides Is equity release right for me? and Equity release – what is it and how does it work? cover the basics, and you can visit our equity release section for further information.

It’s important to remember that equity release definitely won’t be right for everyone, and it will not only reduce the value of any inheritance you might have planned to leave, but it could also affect your entitlement to means-tested benefits. You should therefore consider whether other options may be more suitable for you, such as downsizing. Find out more in our articles Equity release – what are the risks? and Six alternatives to equity release. 

Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.

If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,000 reviews.