The Latest Equity Release Interest Rates

Why Do Equity Release Interest Rates Matter?

Equity release, particularly lifetime mortgages, allows you to borrow money secured against your home. Unlike traditional mortgages, there are no mandatory monthly repayments—the loan is repaid when you pass away or move into long-term care.

However, interest is added to the loan on a compound basis, meaning interest is charged on both the original loan and the interest already accrued. This is known as roll-up interest.

The rate you get is crucial because:

• A higher rate means the loan grows faster, leaving less inheritance for your loved ones.
• A lower rate can save you thousands over time.

What Influences Equity Release Interest Rates?

Like other financial products, equity release rates fluctuate based on economic conditions. The main factor is gilt yields—the return on government bonds—which impact how much lenders pay to borrow money.

However, other factors also play a role, including:

• Predicted changes in interest rates and gilt yields
• Property market trends
• Lenders’ own risk assessments

How Have Equity Release Rates Changed?

Over the past few years, equity release rates have fluctuated significantly.

• January 2022: The Equity Release Council reported an average rate of 4.10%
• August 2022: Rates rose to 5.74%
• October 2022: Moneyfacts reported the average rate had jumped to 7.54%

The good news? Most lump sum lifetime mortgages have fixed rates, meaning once you secure a rate, it won’t increase even if market rates rise. However, this also means you won’t benefit if rates fall.

Does Everyone Get the Same Interest Rate?

No—your rate is personalised based on factors like:

Loan-to-Value (LTV)

This is the percentage of your property’s value that you borrow. Generally, the higher your LTV, the higher your interest rate.

Your Property

Lenders assess:

• Location – Some areas may qualify for lower rates.
• Condition – Well-maintained homes may get better deals.
• Future value – If a property is unlikely to appreciate much, lenders may charge a higher rate.

Your Health & Lifestyle

Certain health conditions or lifestyle factors (such as smoking) may qualify you for an enhanced lifetime mortgage, which can offer:

• A lower interest rate
• A larger loan amount

Product Features

Plans with additional features often come with higher rates. These features may include:

• Inheritance protection – Ensuring part of your home’s value is left to loved ones.
• Drawdown facility – Allowing you to withdraw funds as needed rather than in a lump sum.
• Repayment flexibility – Some plans let you make voluntary interest payments to reduce the overall cost.

What’s the Best Equity Release Rate I Can Get?

Your personal rate depends on:

• Your age (older borrowers typically qualify for higher LTVs and better rates)
• Your health and lifestyle (enhanced plans may offer better terms)
• Your property’s value and location

Fixed vs. Variable Equity Release Rates

Most lump sum lifetime mortgages have fixed rates, meaning your interest rate remains unchanged for the duration of the loan.

If you choose a drawdown lifetime mortgage, your initial withdrawal will have a fixed rate, but future withdrawals may have different rates depending on market conditions at the time.

Can I Switch to a Lower Interest Rate Later?

Yes, switching plans is an option if rates fall or your circumstances change.

• Most lenders allow you to switch after one year.
• You may be able to access a lower rate or qualify for an enhanced plan.
• Some borrowers release more cash during a switch.

However, switching has costs, including:

• Lender’s fees
• Legal/solicitor fees
• Early repayment charges (from your current plan)

Before switching, weigh the potential savings against these costs.

How Is Interest Repaid?

A standard lifetime mortgage rolls up interest, meaning it’s repaid when the home is sold. However, you may have options to reduce the total cost:

• Interest-only plans – Pay full interest each month to prevent roll-up.
• Voluntary interest payments – Reduce the amount owed over time.

You can stop making voluntary payments anytime, at which point interest will roll up as usual.

What Other Costs Should I Consider?

Equity release comes with some one-time fees, which may include:

• Valuation fees
• Arrangement fees
• Completion fees

In addition, you may need to cover legal and adviser fees. Some of these can be deducted from the money you borrow, reducing the upfront cost.

The only potential ongoing cost is an early repayment charge, which applies if you pay off your loan earlier than agreed.

Finding the Best Equity Release Deal

Since equity release rates vary by lender and applicant, it’s important to compare offers and consider both rates and fees.

For a personalised quote, speak with a specialist equity release adviser who can search for the best deal based on your circumstances and market conditions.