Interest rates for equity release products have fallen in the last six months and are now lower than those of most top mortgage lenders.

That is according to Safe Home Income Plans (Ship), a trade body representing 90 per cent of the equity release sector, which is convinced lifetime mortgages are a force to be reckoned with as the credit crunch continues to dent confidence.

Its analysis shows the average rate of annual interest for the top ten equity release providers is currently 6.35 per cent – 0.04 per cent lower than May 2007 when the rate was 6.39 per cent.

Although only a tiny drop, Ship said it was competitive when compared to the average standard variable rate (SVR) for the top ten mainstream mortgage lenders which was now 7.45 per cent – 0.13 per cent higher than the 7.32 per cent experienced in May 2007.

Critics have argued equity release is a “last resort” for borrowers as it is hugely expensive. But Ship thinks its latest analysis contradicts this view.

And it said the long-term pricing structure of equity release plans, which are designed for over-55s, meant interest rates for these products could remain lower – even during economic instability. The rates for lifetime products were also fixed for life.

Andrea Rozario, director general of Ship, said: “This recent research also indicates the strength of position equity release holds within the present mortgage market, with economic instability having little impact upon lifetime mortgage rates.”

Ship’s members’ figures show there was a five per cent rise in new equity release business last year whereas the growth of drawdown schemes, a flexible lifetime mortgage option, doubled.