There’s never been a better time to cash in on your home...

OLDER homeowners are on track to raid their homes for a record £5 billion of cash this year as lenders launch a raft of top equity release deals.

These loans can be a lifeline for pensioners who are property rich but cash poor. They allow borrowers aged 55-plus to tap into the wealth built up in their homes and withdraw it as a tax-free lump sum or regular income.

Homeowners are not required to make any monthly interest payments, with the debt repaid only when the house is sold after you have died or gone into care.

The industry is booming, with the amount of cash being taken out of homes expected to soar by a further 25 pc this year, according to analysts Mintel.

This increase has driven lenders to slash rates and offer bigger loans in a bid to attract in new customers.

One of the biggest providers of equity release mortgages, Legal & General, has cut its rates by as much as 0.32 pc in the past month.

The move means L&G now offers the cheapest rates on the market, according to analysts Moneyfacts. Its two lowest rates, at 3.4 pc and 3.44 pc fixed for life, are available only to home-owners looking to borrow more than £100,000 and the loan must not exceed 19 pc of the value of their property.

To be accepted for a loan of this size, your home would need to be valued at £527,000.

More widely accessible is L&G’s third cheapest deal, a lifetime fixed rate of 3.49 pc for loans as low as £10,000. Borrowers taking out this deal can typically release up to 20 pc of the value of their home in cash.

You can choose whether you want to repay the interest every month, allowing you to protect the equity in your home, or roll up the interest and pay back the loan from your estate when you die.

For example, a 65-year- old who wants to borrow £60,000 — 20 pc of the value of a £300,000 property, at a fixed monthly rate of 3.49 pc — would repay £120,546 over 20 years if the interest is rolled up.

However, if they choose to make the £174.50 interest payment each month, it would leave just the £60,000 loan to be paid back from their estate — a total saving of £18,686. The deal comes with a £599 fee and a free valuation.

If you want to withdraw 30 pc of the value of your home in cash, L&G will charge a higher rate of 4.55 pc.

At 4.55 pc, a 65-year-old who withdraws £90,000 against a property worth £300,000 would pay £341.25 a month in interest, leaving the original £90,000 loan to be repaid from their estate. Or if they want to roll up the interest instead, the loan would almost double to £177,963 over 15 years.

Experts say Aviva has also cut its rates to keep pace with rival L&G.

David Forsdyke, of broker Access Equity Release, says: ‘As the equity release market grows and new lenders enter the market it is becoming more competitive.

‘Last year, we saw equity release lending close to £4 billion, and while that is a tiny sum compared with the £ 267 billion of residential mortgage lending last year, the market has quadrupled over the past ten years.

‘These rates are amazing value when you consider the rate is fixed for life, and for a 65-year-old in good health that could be for more than 20 years,’ he adds.

The falling cost of government bonds is another reason lenders are cutting interest rates.

Some providers link their rates to government bonds, so with the cost down it means they are able to pass on savings to borrowers.

The average equity release rate in the market is now 5.09 pc, compared with 6.15 pc five years ago, according to Moneyfacts.

Rates can vary depending on your age, health, property type or how much your property is worth.

An older borrower, in ill health, may benefit from a cheaper rate than a younger, fitter borrower who is likely to remain in their property for longer. Homeowners are also benefiting from larger loans. In the past 12 months, the maximum amount of equity you could take out has increased from 55 pc of your home’s value to 63 pc. For example, if your house was valued at £200,000, 12 months ago, you would have been able to withdraw a maximum of £110,000. This has risen to £126,000. To get these terms, you would have to be aged 80 to 85. But loan sizes have also improved for younger borrowers, aged 65 and over. At 6.19 pc, One Family offers homeowners aged 65 up to 40 pc of the value of their house, up from 31 pc. Borrowers can repay up to 10 pc of the initial loan each year without incurring any penalty. Jonathan Harris, director of mortgage broker Anderson Harris, says: ‘Equity release was once much criticised for poor advice and flawed products, but the market is going through a renaissance. ‘Rates have fallen dramatically and products are more flexible than in the past. However, while the market is freeing up, those considering equity release still need to consider the long-term commitment and the eroding of the family inheritance. Good advice is essential.’

Money Mail has produced the complete guide to equity release. To request your free copy, call 0844 571 0489 or alternatively, visit mailfinance.co.uk/release