Borrowers stand to save thousands of pounds by moving from a historical rate to one of the deals available today.
In many cases, remortgaging an equity release plan halves the interest rate charged.
Brokers say more borrowers have become aware of the benefits of switching plans.
Dominik Lipnicki, director at Your Mortgage Decisions Ltd, said: “Without a doubt, we have seen more equity release clients looking to review their scheme to see if a cheaper option can be sourced and for some early cases, better options can and do exist.”
Indeed, data from later life firm Key estimate the market carried out 1,789 remortgages in the first quarter of 2022, up from 1,005 in the same period of 2021.
The average customer moved a balance of £121,073 from an interest rate of five per cent to 4.1 per cent.
Over a 15-year period, this would mean a saving of approximately £30,000 for the customer.
Will Hale, chief executive of Key Later Life Finance said: “Remortgaging was so popular in the first three months of the year that it accounted for 25 per cent of all equity released for the purpose of debt management.”
But it’s estimated thousands more people with equity release policies could change deals and save.
Some clients may not even need to pay an early repayment charge, making the switch a no-brainer.
Samantha Bickford, equity release specialist at Clarity Wealth Management, said: “Often if the lifetime mortgage has been in place for a long time, more than eight to 10 years, there may be no early repayment penalty at all to switch to a new deal and potentially save thousands in interest.”
Changes to lifetime mortgages and greater flexibility such as medically enhanced interest rates mean some clients stand to save more, depending on health conditions and medical history, Bickford added.
In one case she remortgaged a client from a 6.4 per cent on their current rate to a new deal of 3.25 per cent, saving them a huge £270,000 in interest over the estimated 16-year term.
Bickford is now trying to use social media to raise awareness among consumers.
Factor in costs
Stuart Powell, managing director at Ocean Mortgages Ltd, has also seen a large increase in clients leaving lifetime mortgages to move on to a lower fixed rate.
He said: “Even a year ago, no one knew that you could remortgage from a lifetime mortgage to another product but gradually as we have spread the message, an increasing number of clients, and our introducers, are reviewing their product.”
As part of client reviews, Powell calculates how much moving from a higher rate to a lower interest rate will save a client and how many years this would take to become worthwhile.
He added: “When compared with life expectancy data, it is often the case that remortgaging is the correct option.”
Powell has seen clients with hefty rates of more than seven per cent achieve new rates of under three per cent by completing a remortgage.
Andy Wilson, director at Andy Wilson Financial Services warned the cost of switching mortgages, which is usually in place for 10-15 years on more recent plans, must be factored in.
He said: “When looking at whether it is sensible or appropriate to consider remortgaging, you have to balance the lower interest rate that might be achieved with the costs of setting it up.
“There will invariably be legal costs, of up to £1,000 or so, plus there will be an adviser fee. On smaller loan sizes, these will represent a bigger proportion of the new loan, so taking longer to recover.”
Savings are not guaranteed, especially as it will take some time to recoup – and this depends on life expectancy.
Wilson added: “Older clients may not have sufficient time to generate cost savings if they die soon afterwards. What time period for different ages would be a reasonably safe bet on them living long enough? Who should decide that, and on what basis?
“Life expectancies are only ever averages of actual deaths and not reliable indicators. The client may have longevity in their family, but it is not enough to blindly accept that they expect to live for many more years. Nobody wants a complaint from aggrieved family members that the adviser took a gamble on their parents’ estate.”