Equity release products are now being offered at record low interest rates to "tempt" older savers, according to new analysis by Defaqto.

The analysis found that the rates have "plummeted" over the last 18 months, with the average interest rate in mid-2018 around 5.4 per cent, compared to the current average of 4.55 per cent.

The lowest interest rate currently being offered was 2.8 per cent at age 65, from More2life.

The record low interest rates could offer savers a cheaper way to borrow against their home, but Defaqto has warned that “ER is a complicated product with lifelong consequences and should not be entered into lightly.”

Commenting on the report, Canada Life technical director, Andrew Tully, said: “The pension freedoms opened up the retirement market to new ways of thinking, and it’s been recognised that there has been a lack of product innovation in the market by way of response.

"So it’s really good to see a guide from Defaqto which places the spotlight on both the challenges advisers and their clients face balancing the various risks in managing retirement income strategies.”

Recent research by Just Group found that almost one-fifth of people who have used property to generate income have done so in order to prepare for retirement, highlighting that ER products could see “more people in later life tapping into property wealth to meet their retirement aspirations.”

This also follows the Equity Release Council’s 2019 spring report, which showed that single women over 55 accounted for over a quarter of new equity release agreements made in late 2018, a 50 per cent increase from the previous year.

Commenting on this, Canada Life Home Finance head of marketing and communications, Alice Watson, highlighted: “The increase in the number of women using lifetime mortgages demonstrates how releasing equity can reduce the income shortfalls experienced by many women in retirement.”

Defaqto consumer finance expert, Brian Brown, stated: “Equity Release has been criticised for being expensive and inflexible in the past, but with historically low rates and portable loans, they are a much more viable option for some borrowers.

“Downsizing to a smaller or cheaper property may be a better option if you are able to move. That way you can free up cash from the sale to enjoy without paying interest. This though is not always a practical option and many people simply do not want to leave a home they lived in for many years.

“Releasing equity from your home is a big decision with ramifications for the rest of your life; you should take advice from an independent and qualified professional before making any decisions."

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