Equity Release Gilt Yield Linked Redemption Penalties Explained:
E.g. A company borrows more to buy an aeroplane or lend money to you: Corporate Bond £100 with a yield of 3% pa. (If Bank interest rates are 1% pa that’s a 2% risk margin) = £3pa income yield.
This is the same for equity release:
An equity release company borrows money (e.g. issuing Corporate Bonds) at say 3% pa.
If Rates Rise
It is costing the equity release company more after all, to buy its way out of the money it borrowed to lend you, it therefore charges you more with a higher redemption penalty.