Average Interest Rates on Equity Release Mortgages

Discover guidance and insights into the average equity release interest rates in the UK and how to qualify for a competitive deal.

Average Interest Rates on Equity Release Mortgages

Interest rates on equity release mortgages are a bit of a grey area since the calculation process is bespoke to each application and far more complex than a conventional mortgage.

Here we look at some of the average interest rates offered on equity release loans and explore why you might receive a very different offer from one lender against another.

How Do Equity Release Companies Decide What to Charge?

There isn't a quick rates table or analysis tool you can use to determine what interest rates you'd expect to pay on an equity release mortgage.

The lender provides a loan, either as an open facility (with a maximum limit) or a cash lump-sum payment.

Your interest charges are rolled up into the balance, and you don't normally make any repayments for the lifetime of the loan.

When the lender sells the property, they recoup the debt and transfer the balance to your estate when you pass away or move into care.

Before deciding what interest rate to offer, an equity release lender will assess your property, age, health, life expectancy, and several other aspects.

What Are the Current Average Equity Release Rates?

As we'll explain, average equity release rates vary considerably, depending on many factors.

For example, if you want to borrow £500,000 as 50%  of your property value, you will pay a different rate from someone looking to borrow £500,000 in regular instalments and at 25% of their equity.

Rough averages sit at around 3.4% to 6.5%, and you'll see a few illustrations of what terms you might get for your interest rates in the table below.

What Equity Release Rates Am I Likely to be Eligible for?

Eligibility will depend on your age, location, property value, circumstances, loan amount, and other factors, but the below table looks at a few indicative rates from well-known equity release lenders to give you an idea.

 

Monthly interest charge

Annual interest charge

Lump-sum payment limits

Maximum loan value

Lender A

3.49%

3.55%

£10,000 to £750,000

42%

Lender B

3.4%

3.45%

£100,000 to £2 million

38%

Lender C

3.52%

3.58%

£10,000 and upwards

40%

Lender D

3.61%

3.67%

£10,000 and upwards

50%

Lender E

3.93%

4.0%

£15,000 to £500,000

45%

Lender F

4.12%

4.12%

£15,000 to £600,000

45%

Comparing Rates Between Equity Release Companies

There are multiple variables between equity release products, so the best way to compare the rates offered is to analyse two similar schemes.

It's almost impossible to quantify which product is 'better' if one is interest-only and the other requires no repayments.

Look for these different terms to make a fair comparison:

  • Lump-sum or drawdown payments - you can either borrow against your equity as a one-off, larger value or have a facility you can make withdrawals from as and when you need to.
  • Interest-only or no repayments - interest-only equity mortgages require a monthly interest repayment. This option stops the loan balance from accumulating but needs an affordability assessment.
  • Payment flexibility - equity release mortgages with optional ad hoc repayments tend to be more expensive since the lender has less control about the end balance or when you will make deposits.

It would also help to look for maximum loan values on each scheme (most lenders have a cap on lump sum values).

Finally, the value of your property may influence the lender you choose. Most will consider properties worth £70,000 or above, but upper and lower limits vary considerably.

Are There Cheaper Alternatives to Equity Release?

Equity release is often considered 'cheap' because you don't need to make any repayments during the lifetime of the mortgage.

The interest is rolled up into the loan balance and recouped when the lender sells the property when you move into care or pass away.

However, you should understand the overall interest charges to ensure your beneficiaries receive the maximum benefit from the balance of the sale proceeds when the lender sells the residence.

Please get in touch if you'd like recommendations about other mortgage products, such as a second charge mortgage, which might be cheaper in terms of retaining property ownership.

Equity Release Advice From the Independent Experts

If you're interested in comparing equity release rates currently available or assessing the pros and cons of comparable products, please contact Revolution Finance Brokers.

Our advisers are independent and whole-of-market and will ensure you have full oversight of the varying options and can make informed, financially secure decisions.

Why Revolution Brokers?
  • Whole of market brokers

  • Mortgage that suits you

  • On time customer support

FAQs

How does our broker-matching service work?

Equity release calculators are only designed to give you a rough idea about how much you might be able to borrow.

They are far from accurate because a generic calculation cannot consider your health, property valuation, or other circumstances.

Calculations in equity release lending can be complex, so we strongly advise you to seek independent advice rather than relying on figures produced through an online equity release tool.

There are two criteria we recommend you look for when you're selecting a broker, financial adviser or mortgage adviser for support in choosing an equity release product:

  • Independence: any adviser who isn't independent is linked to a bank or lender with a limited range of products. They can only sell you products from that lender and won't recommend more beneficial mortgages outside of their remit.
  • Whole-of-market: we have access to almost every product and lender across the UK and can suggest advantageous products ideally suited to your requirements.

Every lender makes decisions based on their policies and risk appetite, but generally, the assessment will consider a few factors:

  • Requested LTV: the higher the proportion of your equity you wish to borrow, the greater the risk to the lender. You can normally borrow around 50% of the property value, although a higher LTV is usually only available to older applicants.
  • Age and health: you can apply for equity release from 55 but won't be able to borrow as much if you are a younger applicant. If you are older or have health conditions that impact your estimated life expectancy, the lender will expect to sell the property sooner - and offer lower rates.

Accessibility: some of the best equity release rates on the market are not offered directly to the public. A broker has a professional lender network and can signpost you towards deals that you wouldn't be able to find elsewhere.

Possibly, yes. Credit histories are less critical in equity release because you won't be making regular repayments unless you opt for a retirement interest-only product.

Lenders are more interested in the property value and potential resale, so you can apply for competitive equity release rates even if you've had credit issues in the past.

It's tricky to make any suggestions because the most suitable products for you - whether equity release or something else - will depend on:

  • How much you wish to borrow.
  • Your age, health and finances.
  • The property you own.

Some people are better off with a remortgage, second charge mortgage, downsizing, or taking out an unsecured loan.

The best way to explore potential alternatives is to contact the Revolution team for personalised guidance from the whole-of-market equity release brokerage consultants.

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The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature. We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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