External factors are bridging about innovation in the equity release market, More 2 Life has argued.

The lender believes a weak housing market is highlighting the benefits of protected equity guarantees for customers. Meanwhile record low gilt yields are focusing attention on early redemption penalties.

Average house prices are down 0.1% year on year at £160,941 and forecast to remain flat for the rest of 2012 while the FTSE UK 15 Years Gilts Yield Index is at an historic low of 2.24%.

The stagnant housing market means customers should look closely at protected equity guarantees which can adjust loan-to-value rates in line with their age if they withdraw more money and protect against falls in property values.

More 2 Life argues the gilt yield low means equity release loans which link early redemption charges to gilts offer the very real prospect of remortgaging without penalties in the future.

“Innovation is driving expansion in the equity release market and product features such as the protected equity guarantee and redemption charges are increasingly important,” says Jon King, Managing Director of More 2 Life.

“Intermediaries have a real opportunity to demonstrate their expertise in a market which is set for strong growth and advice is crucial to ensuring customers receive the maximum benefit from products.

“The launch of the Equity Release Council last month has created a unified voice for the industry and the aim now must be to outline product benefits fully and to enhance products.”

More 2 Life’s protected equity guarantee is based on the percentage of the maximum withdrawal not taken; for example, a customer who is entitled to a £50,000 withdrawal who takes out £30,000 would have a 40% protected equity guarantee equivalent to £100,000 on a £250,000 property. It adjusts the LTV in line with the customer’s age if they withdraw more money and protects against falls in property values of up to 5%.

Its early redemption charge is only payable if the FTSE UK 15 Year Gilts Index is lower than its benchmark yield when the loan is taken out – More 2 Life’s is currently 2.42% meaning customers would not pay a penalty.

More 2 Life assesses customers for different levels of medical and lifestyle impairment taking into account factors such as weight, smoking, general health and early retirement on ill-health grounds for its enhanced equity release.