Average rates on equity release deals have fallen below 5 per cent for the first time on record, new analysis by Moneyfacts has shown.
The comparison site found that the cost of lifetime mortgage deals has plunged to its lowest level since the company began collecting data in 2007.
The average rate now stands at 4.99 per cent, down from 5.1 per cent a year ago and 6.11 per cent five years ago.
Borrowers also have a much wider choice as there are now 207 deals compared to 164 a year ago and 48 five years ago.
Moneyfacts finance expert Rachel Springall says: “The equity release market has evolved considerably over the years, with choice increasing and rates reducing as a result – the market has become much more accommodating to prospective borrowers.
“While rate alone should not be the deciding factor when choosing a lifetime mortgage, it is still a positive indicator that competition is rife in the market.”
Springall warns that borrowers must take into account fees when evaluating the cost of an equity release deal, but also consider what degree of flexibility they need.
According to the Equity Release Council, two-thirds of new customers opted for drawdown rather than borrowing a lump sum the second half of 2018.
Springall says: “By choosing a drawdown product, consumers could potentially save interest compared to taking a lump sum.”
She urges borrowers to take independent advice whether they are borrowing to fund care needs or simply to improve their lifestyle in retirement.