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Will Equity Release Interest Rates Fall?

Tuesday 25th March 2025

Will Equity Release Interest Rates Fall?


Equity release interest rates move with long-term GILT yields—if GILTs fall, rates may follow.
Current rates start from around 5.94%, with 6% considered average and 7%+ tied to higher borrowing or flexible plans.
Factors like age, loan amount, property type, and features all impact the rate you receive.
Rates have climbed sharply since 2022, though signs suggest potential easing if inflation continues to drop.
A personalised quote is key to finding the right plan—speak to MY LATER LIFE for expert guidance.

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Will Equity Release Interest Rates Fall?
At MY LATER LIFE, we know interest rates are one of the biggest considerations for anyone exploring equity release. With rates rising in recent years, many clients are asking: Will equity release interest rates come down again?

Let’s explore the current outlook, what impacts rates, and what this means for your plans.


How Equity Release Rates Are Set
Equity release interest rates are closely tied to long-term UK GILT yields—the returns the government offers on long-term borrowing. According to may scorces if GILT rates rise, equity release rates tend to rise too. Conversely, if GILT yields fall, it can signal potential rate reductions in the equity release market.

In early 2025, GILT yields remain relatively elevated following recent economic and political changes, but if inflation eases and interest rates are cut, we could start to see downward movement.


What Are Current Equity Release Interest Rates?
Here's our general guide:

Around 5% = Excellent rate
6% range = Typical/average
7% and above = Usually tied to larger loans or enhanced product features

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Real-Life Examples: What Rate Could You Get?
Interest rates vary based on personal circumstances. Here are a few recent client cases we've helped:

Single homeowner, age 61
Property value: £650,000
Release amount: £52,945 upfront + £30,000 in reserve
Rate: 6.00% MER (6.17% AER)
Context: Needed to repay mortgage and access funds for daily living; out of work and using credit cards.


Couple aged 71 & 73
Property value: £575,000
Release amount: £201,250
Rate: 6.78% MER (6.99% AER)
Context: Aimed to repay interest-only mortgage and car finance, with flexibility to make repayments and downsize.


Couple aged 76 & 77
Property value: £250,000
Release amount: £92,000
Rate: 6.48% MER (6.68% AER)
Context: Looking to clear an existing mortgage and secured loans; ex-local authority home.


Want to see what rate you might qualify for? Call us on 0207 100 4255 FOR A FREE QUOTE.

What Affects Your Interest Rate?
A number of factors determine your interest rate, including:

Loan-to-Value (LTV): The more you borrow relative to your home's value, the higher the likely rate.
Credit history: While past issues like CCJs or insolvency don’t rule you out, they may limit access to lower-rate plans.
Product features: Plans with drawdown options, inheritance protection, or flexible repayment terms may come with slightly higher rates.
Property and eligibility: Some lenders won’t lend on certain property types, pushing you toward other lenders with potentially higher rates.
Age and marital status: While age doesn’t directly affect the rate, it affects how much you can borrow. Also, applying in joint names (especially if one applicant is younger) can affect eligibility and rate.

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AER vs MER – What’s the Difference?
You’ll often see two types of interest rates:

MER (Monthly Equivalent Rate): Interest is calculated monthly and compounded.
AER (Annual Equivalent Rate): Shows the total interest charged over a year, including monthly compounding.
For example, a MER of 5.94% results in an AER of 6.10% after 12 months of compounding.


Fixed vs Variable Interest Rates
Most lifetime mortgages now offer fixed interest rates for life, giving you complete certainty over future costs.

Some lenders (e.g., OneFamily) still offer variable rate plans, typically linked to the Consumer Price Index (CPI). These plans always have a maximum cap for protection, but in recent years, fixed rates have often been the better-value option.

Note: Variable rate plans are no longer available for new customers as of 2024.


How Have Rates Changed Over Time?
Lifetime mortgage rates dropped to record lows during the pandemic, with fixed rates dipping just above 2% in 2020. However, following the 2022 mini-budget and broader economic shifts, rates rose sharply.


So… Will Equity Release Rates Fall?
It's possible—but not guaranteed. If GILT yields begin to fall (as they might with lower inflation and a dovish Bank of England stance), we could see equity release rates ease.
However, there’s typically a delay between falling GILT rates and lenders adjusting their products. And if GILTs rise again, rates may go up quickly.

Because equity release plans often come with fixed-for-life rates, the best time to secure a plan is when the rate fits your needs and the plan features align with your goals.


Need Help Deciding?
At MY LATER LIFE, we’re here to provide clear, expert, and personalised guidance to help you make the right call. Whether you're looking to repay debts, support your retirement, or simply explore your options, our experienced advisers are here for you every step of the way.

Speak to us today or request a free quote to see what’s possible for your later life. SEE HOW MUCH YOU COULD RELEASE?

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