Borrowing costs

Voluntary repayment rule will help reduce borrowing costs

Homeowners who sign up for new capital release plans can now make voluntary, penalty-free partial repayments to help lower borrowing costs.

This feature is already part of some end-of-life loan plans. However, under new guidelines introduced today, it will become a mandatory part of all products offered in this sector.

Indeed, being able to make additional repayments means customers who lend later in life can reduce the impact of compound interest and reduce borrowing costs.

Capital release allows seniors over the age of 55 to borrow against the value of their home without making repayments unless they wish, with interest and the loan usually being settled when the client dies or goes into permanent care .

According to the Equity Release Council, the body that regulates the industry, the new condition will deliver combined savings to customers of £39 million over the next 10 years and £99 million over the next 20. coming years.

He said more than 125,000 penalty-free partial refunds were made in 2021, averaging £608 each time.

Jim Boyd, CEO of the Equity Release Council, said: “The right to stay in your home for life, with no obligation to make ongoing repayments and no threat of repossession, is at the heart of the appeal of the equity release since 1991 and remains a central pillar of the modern market.

“Our new product standard adds to this by ensuring people have the freedom to reduce their borrowings if circumstances change.

“It allows Capital Release clients to mitigate the effects of compound interest and lower their borrowing costs later in life, which we know is often one of their top concerns.”


This latest feature has become the fifth “standard” to be enforced by the Equity Release Council. It has already established the following prerequisites:

  • The right to stay in one’s home for lifewithout any repayment obligation to create risk of repossession before their death or placement in permanent care;
  • A fixed or capped interest rate for lifeexisting customer loans are therefore never affected by interest rate increases;
  • A non-negative capital guarantee, meaning clients will never owe more than their home is worth and can never leave a debt to family or other beneficiaries; and
  • The right to carry (move) your loan to another property provided it is acceptable according to the lending criteria.

Jim Boyd added: “The Equity Today publication is a flexible financial planning tool for a range of scenarios, from giving to family to supporting a better standard of living while extending life in retirement.

“Consumers should always seek advice from a Council member to explore their options and alternatives to Equity Release, to receive product protections and expert advice to decide if it’s right for them.”