Borrowers taking out a lifetime mortgage could save more than £30,000 compared to last year as interest rates on the products continue to slide.
The interest rate on the average fixed rate lifetime mortgage was 5.53 per cent in July, down from 5.55 per cent the previous month and 6.25 per cent in July 2016, according to Moneyfacts.
As a result, an individual opting to release a lump sum of £75,000 from the average fixed rate lifetime mortgage today would face an outstanding debt of £168,151 in 15 years’ time - £18,055 less than the same customer who opted for a similar equity release product a year ago.
The amount of interest saved over a 20-year term would be even higher, at £32,060.
The savings compared to seven years ago, when average fixed rate lifetime mortgages peaked at 7.07 per cent, are even more significant, amounting to £40,816 in interest over a 15-year period and £73,968 over a 20-year period.
Over a 20-year period, the savings would climb to £135,309 if the customer opted for the current lowest fixed rate lifetime mortgage of 3.82 per cent.
Richard Eagling, head of pensions at Moneyfacts, said: “The extent to which equity release interest rates have dropped in recent years has not only enhanced the products’ appeal to new customers, but has also made it worthwhile for existing equity release customers to review their products.
“This is particularly the case for those who may have taken out a lifetime mortgage seven years ago, when rates peaked.
"With rates at record lows and a greater number and range of products to choose from, there has never been a better time to consider equity release.”
Dominic Basilea, director at East Anglia-based Aqua Wealth Management, said: “I personally think interest rates on lifetime mortgages are a big key. If you can get more competition and rates coming down, it would be a better product for the client.
“We have not seen a huge impact yet, but I think over the next 10 years it will be an area that could be advantageous - for the main reason that people who have not started saving for their pensions early on may find themselves needing equity release in later life.”