Switch plans for a £50k saving

Existing equity release customers could potentially save more than £50,000 by switching to a cheaper plan as interest rates halve, figures from Age Partnership show.

Yet many do not realise they are free to switch equity release plans after taking one out.

Rock-bottom interest rates and increased competition have slashed the charges on equity release plans from more than 6% five years ago to around 3.51% now.

Age Partnership customers who switched plan last year will save £51,000 in interest over the average 16-year term of their plan, says executive director of later life lending, Matt Stirland.

“Switchers should act fast, as the Bank of England has hiked base rates three times in recent months and this is already pushing up lifetime mortgage rates, although they are still much lower than in the past.”

Many do not realise switching is an option because their original adviser or broker no longer operates. In some cases, the partner who arranged the original plan has died, and the surviving spouse does not understand how it works and the potential saving from switching.

“Many don’t involve their other half when taking out equity release, so don’t realise the importance of regular reviews,” Matt adds.

Anyone who has had their existing equity release loan for 12 months or longer can get a review, and a good adviser should do this for free and without any obligation to take action. But switching is not right for everyone.

“Sometimes early repayment charges may be too high to make changing plans worthwhile. You will not know until you have the review,” Matt says.

A switch could be worth grabbing with both hands