Equity release interest rates

Updated 1st December 2023

The lowest equity release interest rate in December is currently 5.95%* (MER), although according to the latest Equity Release Council Q3 2023 report, the average interest rate is 6.28% for drawdown and 6.66% for the lump sum option.

Comparing equity release interest rates can help you identify which companies offer the best equity release deals. The following information will help you understand how equity release interest rates work, how to compare plans, what you can expect to pay and what you can do to reduce the overall cost of the loan.

Lifetime mortgage interest rates

The comparison table below compares some of the best equity release interest rates with leading specialist Age Partnership, all of which come with a no negative equity guarantee for your protection.

These are just a few of the lifetime mortgages available so when you are ready, speaking to a specialist who can compare equity release on your behalf, free of charge may help you choose the best equity release deal for you.

Equity release interest rates

Provider MER Type Product How much cash could you release?
Aviva 7.71% Fixed Drawdown Calculate now
Aviva 7.71% Fixed Lump sum Calculate now
Pure Retirement 7.20% Fixed Drawdown Calculate now
Pure Retirement 5.95% Fixed Lump sum Calculate now
Just Retirement 6.89% Fixed Drawdown Calculate now
Just Retirement 6.20% Fixed Lump sum Calculate now
Canada Life 6.68% Fixed Drawdown Calculate now
Canada Life 6.68% Fixed Lump Sum Calculate now

Please note: Lifetime interest rates correct as at 1st December 2023. Rates vary by provider & depend on your personal circumstances and whether you prefer a cash lump sum or an income - December 2023 - 5.95% APR exclusive deal through Age Partnership when you use our calculator*.

Equity release interest rates – how do they work?

With a lifetime mortgage, you borrow an agreed sum of money, using your home as security. Compound interest is charged based on the equity release interest rate agreed with your provider but is only repaid once you have died or moved into long term care and the property is sold.

Instead, the interest rolls up and is added to your original loan, plus any interest already accumulated – often referred to as compound interest. This means your overall debt will grow at a quicker rate compared to a standard mortgage.

When you die or move permanently into long-term care, the loan including the interest will be repaid from the sale of your property.

What is the typical interest rate for equity release today?

The typical equity release lifetime mortgage interest rate today is between 5.95% to 7.34%, with Moneyfacts UK reporting an average equity release rate of 6.63%.

According to the latest Equity Release Council’s Autumn 2023 report, data supplied by Moneyfacts, the gap between residential mortgages and lifetime mortgages has significantly fallen over the last decade. In January 2013, the average lifetime mortgage was almost 3% higher than the average fixed rate residential mortgage. However, throughout the summer of 2023, the difference between lifetime and residential mortgages dropped to only 1% compared to a 5 year fixed mortgage and less than 0.5% compared to a 2 year fixed deal.

So, although lifetime mortgage rates are typically higher, they are more competitive compared to standard residential mortgages as the increase in interest rates hasn’t been as great.

How are equity release interest rates calculated?

Although the lowest rate available today may be 5.95%*, the actual interest rate available to you will depend on a number of factors including:

  • How much you want to borrow
  • Your credit history
  • The lifetime mortgage you select
  • The provider's lending criteria
  • Your age and marital status

Are equity release interest rates fixed or variable?

Most equity release interest rates are fixed for life, so you know in advance exactly how much interest will be charged and how it will accumulate. If you choose a drawdown lifetime mortgage, your interest rate will be fixed at the time you release the money.

Whilst fixed interest rates are more common place on a lifetime mortgage, you can choose a plan with a variable rate if you prefer. According to Equity Release Council rules, all variable lifetime mortgages must have an upper cap on the rate, so you will have the reassurance of knowing what the highest possible interest rate could be.

So how much will interest will I pay on equity release?

The amount of interest you pay back on equity release will depend on the size of your loan, the interest rate, the number of years the loan is in place and whether you make repayments. Some lifetime mortgages allow you to repay a percentage of the loan without penalty, or you can opt to make monthly repayments against the interest, keeping overall costs down.

Can you reduce the amount of interest accumulating on a lifetime mortgage?

If you’re concerned about the compound interest building up too much, you can choose a lifetime mortgage that allows you to repay some, or all of the interest without incurring an early repayment charge. Over half the products offered by members of the Equity Release Council allow you to do this.

Other optional features that can help include:

Drawdown reserve: This lets you release an initial amount of money and create a reserve account that you can draw down on as and when you need it. You don't owe any interest on the money in your reserve account unless you actually access it, so compound interest accrues more slowly.

Downsizing protection:  If you decide to sell your home and move to a smaller property, this protection lets you repay your loan without having to pay an early repayment charge.

Why are equity release interest rates higher than standard mortgage rates?

Lifetime mortgage interest rates are higher compared to standard mortgage rates primarily because:

  1. Your lender doesn't know when they will get their money back, unlike a standard mortgage with a set repayment schedule.
  2. You don’t have to make any regular or monthly payments at all, so your lender may not have any income from the loan for many years.
  3. Your lender could be affected if property values fall in the future.

Why compare equity release interest rates?

Whether you choose to do it yourself or with the help of a qualified IFA or broker, comparing equity release could help you find the lowest interest rates on the market. By comparing plans, you can see at a glance which providers offer the best lifetime mortgage interest rates.

In addition to comparing interest rates, you can also read our reviews and if you want to see how much cash you can release from your property, use our free equity release calculator.

What else to look for when comparing equity release

If you’ve started to compare equity release yourself, there are a number of things to consider in addition to the interest rate charged:

  • Are you wanting to take the money in one go or do you need a lifetime mortgage that offers a draw down option so you can access the cash as and when you need it?
  • Would you like to guarantee that some equity is left for family?
  • Would you like the flexibility to lower the final loan by repaying some of the interest on a regular basis or as and when you like?
  • Find out how much equity release costs, in total including arrangement and legal fees

So, although money is important, when you compare equity release you should also consider how the lifetime mortgage works and the flexibility it offers you - which is where a qualified equity release specialist could help.

How can I find the best equity release interest rate?

To help you find the best equity release interest rates, you may want to get the help of a specialist IFA or broker who can compare equity release on your behalf.

We work in association with Age Partnership, an equity release specialist who compare lifetime mortgage interest rates and products with a selection of the UK’s leading providers. They provide initial advice for free and without obligation. Only if you choose to proceed and your application completes would a typical fee of £1,895 be payable - which can usually be taken from the cash sum.

Through their relationships, they have secured preferential lifetime mortgage rates that you may not be able to get elsewhere.

They will talk through your requirements, fully explain how equity release works; help you consider whether it’s right for you or if other options are available such as downsizing and provide you with comparisons and a written illustration that you can talk through with your family.

Try the no obligation calculator

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*lowest rate with our chosen partner Age Partnership, other rates maybe available.

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