At the time of writing the average rate of interest for the top ten equity release providers was 6.39 per cent. This compares with an average standard variable rate for the top ten mainstream mortgage lenders of 7.32 per cent, - a 0.93 per cent difference. This compares with a difference in September 2006 of just 0.35 per cent.

The fall in rates can in part be attributed to more competition in a sector once dominated by just Northern Rock and Norwich Union, but which now includes lenders such as Saga, Prudential and Standard Life.

Andrea Rozario, of specialist equity release IFAs Rosario Harris, says: “Many people don’t realise they can switch lenders, and if they do they don’t know how to go about it.”

However, she adds: "Before borrowers consider switching, they need to take into account a number of factors. These include any redemption penalty for paying back the old mortgage, the new interest rate, and how long they are likely to live in order to benefit from the new rate."

Redemption penalties are a tricky area, says Ms Rozario. "Some, such as Norwich Union, use quite a complicated formula based on the price of gilts, and they do it on a case-by-case basis, so you can’t really work it out for yourself,” she says. “Others, such as Hodge Equity Release, charge a flat rate – such as 5 per cent during the first five years. It is essential that you get independent advice."

When you are considering switching your loan, you should remember that the amount of the new mortgage will be the old loan plus the interest so far. Savings can be as much as 2 per cent - which can make a huge difference in what, if anything, you have left of the value of your home, as the loan is increasing all the time as the interest is compounded.

Rozario says you should also be clear about why you want to remortgage. “Most people will say it is to save money, but there may be other objectives, which need to be taken account of.” You will also need to factor in the fees you will pay for switching, which normally average between £1,000 and £1,500.

Rozario Harris: 0845 345 7451

SHIP: PO Box 516, Preston Central, PR2 2XQ, tel: 0870 241 6060.

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