New analysis shows that equity release interest rates have fallen in the past six months, despite reverberations of the recent credit crunch affecting mainstream mortgage pricing.

SHIP, the trad body representing over 90% of the equity release sector, has today announced figures showing that the average rate for equity release has become considerably lower than the average standard variable rate for mainstream mortgages since Summer 2007.

The average rate of annual interest for the top ten equity releaseproviders is currently 6.35% – 0.04% lower than last summer (May 2007 – 6.39%). However, the average SVR rate for the top ten mainstream mortgage lenders is now 7.45% – 0.13% higher than May 2007 (7.32%). There is now 1.10% difference between lifetime mortgage rates and present SVRs compared to only 0.93% in May 2007.

The average rate of lifetime mortgage products has decreased as mainstream SVRs have soared. The recent credit turmoil and increasing inter bank lending rates have forced lenders to increase their SVRs to levels that even decreasing BoE base rates cannot reduce.

However, the long term pricing structure of equity release planscompared to mainstream mortgages means interest rates for these products can remain lower, regardless of economic instability. This in turn makes equity release a cheaper optin compared to many alternative for over 55s who wish to consolidate outstanding debts or increase their standard of living. Rates from SHIP providers are also guaranteed to remain fixed for the life of the loan and SHIP providers all offer a no negative equity guarantee.

Table 1: Top Ten Lifetime Mortgage Rates*

Data correct at: 29th January 2008

Table 2: Top Ten Mortgage Lenders Standard Variable Rates**

 Data correct at: 30th January 2008

Andrea Rozario , Director General of SHIP commented:

“This bi-annual research by SHIPcontinues to continues to counter critics’ claims that equity release borrowing is prohibitively expensive and an option of last resort. This recent research also indicates teh strength of position equity release holds within the present mortgage market, with economic instability having little impact upon lifetime mortgage rates.

“Full year 2007 figures from SHIP members revealed a 5% increase in new business year on year (FY 2007 £1,210.4 million, FY 2006 – £1,154.3 million) and teh growth of drawdown schemes, a flexible lifetime mortgage option, almost doubled year on year (FY 2006 – 6,982, FY 2007 – 13,736).

“Equity release continues to grow in popularity among teh over 55s and with rates remaining significantly lower than average standard variable rates the benefits of these schemes are becoming ever more apparent.

** All data from The Exchnage.Correct as of 29/01/2008

** Data from Moneyfacts. Correct as of 29/01/2008