Later life mortgage broker Responsible Life has calculated that lifetime mortgage customers have netted an average 41% interest rate cut in five years — saving them over £10bn.

Data obtained from Financial Conduct Authority (FCA) using a Freedom of Information request reveals that the average interest rate secured by lifetime mortgage customers was 3.40% last year, down 41.3% from 5.79% in 2015. Rates stood at 4.17% in 2019, which means they are down by a fifth in the last year.

Responsible Life researched the specific interest rates that applied to every single lifetime mortgage taken out since January 2015. The overall saving this has delivered for 190,844 consumers who took out their loans between 2016 and last year is an estimated £10.02bn.

Retirees are benefiting from low central bank rates and increased competition. This has led to what Responsible Life has previously called a ‘middle-class stampede’ for lifetime mortgages. The number sold has risen 74% in five years, climbing from 23,728 in 2015 to 41,286 in 20201.

Falling rates, in connection with rising property prices, mean tens of thousands more homeowners with lifetime mortgages could save large sums by switching, even after taking Early Repayment Charges (ERCs) into account, the broker said.

Steve Wilkie, executive chairman of Responsible Life, said: “Retirees have been hoovering up improved rates over the past few years as the popularity of lifetime mortgages has exploded.

“This FCA data confirms that, not only have advertised rates dropped, but the real rates customers have been able to secure have been collapsing too.

“This is hugely important. Just because advertised rates fall doesn’t mean affordability criteria unlock those rates for all borrowers. This proves the equity release market’s progress on rates isn’t just window dressing. Older homeowners have been able to feel the benefit of falling rates in their thousands and are voting with their feet when it comes to financial planning in retirement.”