Relative cost of lifetime mortgages is increasing, says Defaqto

The average fixed-rate charged for lifetime mortgages has increased, when compared to their closest product in the residential mortgage market, it has been claimed.

According to David Black, banking specialist at Defaqto, the gap between interest rates charged by lifetime mortgages and long-term fixed rate residential mortgages has widened considerably over the last two years.

However, he said it is worth pointing out that the 'no negative equity guarantee' is responsible for an additional cost to equity release providers of around 0.7 per cent per year.

"A number of providers have exited the market over the past couple of years citing either funding constraints or more profitable opportunities in alternative product areas," Mr Black noted.

"Equity release has long been thought of as a sleeping giant but, given the perilous state of many people's pensions, it can only be a matter of time before the two types of equity release schemes - lifetime mortgages and home reversions - become a more integral part of retirement planning."

Ray Boulger, senior technical manager at John Charcol, recently claimed that flexible-rate mortgages are currently most appealing to UK homebuyers. 

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2010-08-27 11:57:39 © Moneyextra.com