Equity release interest rates
Understand how interest rates on equity release work
Equity release products are a kind of mortgage. And like any mortgage, if you take one out your lender will charge you interest on it. But, depending on the lender and product you choose, you might not have to make any interest payments to them. They can add them to your loan instead.
That’s one of the key benefits of equity release. But even if you’re not making regular interest payments, it’s still very important to know:
- how equity release interest rates work
- roughly how much your lender might charge
- any other possible costs to consider.

Want to learn more about equity release?
We answer common questions and set the record straight on how equity release can help boost your finances.
Do you pay interest on equity release?
Yes and no. Your lender will charge interest on your equity release loan. They’ll calculate it daily and add it up to create a month-by-month sum you’ll owe them. But exact interest rates on equity release can vary a lot – as can the amount you’ll need to pay back every month.
Depending on the provider and product you choose, you might not have to make any monthly payments at all. For example, you could:
- Choose a home reversion plan. It’s a type of equity release, but you don’t pay any interest. Instead, your lender ends up owning a percentage of your home.
- Have your interest added directly to your loan. But if you do that, the amount you owe can go up very quickly. You’ll pay interest on your interest, as well as on the original loan.
Note also that both choices will cut down the equity left in your home. In that case, even if you find low interest rates equity release can leave you with less to pass on to your loved ones.
But one thing you don’t have to worry about is negative equity. That's when your loan ends up being larger than the amount your home could sell for. This is called a No Negative Equity Guarantee. It doesn't apply to any missed monthly payments and the interest on them for our Payment Term Lifetime Mortgage, though.
So, exactly how much you end up paying will depend on:
- the type of equity release mortgage you go for
- the specific lender and product you decide on
- how you handle your interest payments during the life of the loan
- whether you pay them directly or have them added to your loan
- if you pay them directly, whether you cover all or just part of the interest you owe.
What is the interest rate on equity release?
Interest rates on equity release products often vary. Different lenders will offer different rates on each one. They’ll be based on the Bank of England’s base rate, which was 4.75% in November 2024.
It’s important to bear in mind that equity release interest rates tend to be higher than standard mortgage ones. And to get the best interest rates for equity release, we’d always recommend shopping around.
Are equity release interest rates rising or falling?
In 2023, equity release interest rates went up and down:
- January’s best available rate was quite high, at 5.99%
- It fell to 5.24% in April but then went back up to 5.52% in May and 5.87% in June
- Between July and November 2023, it climbed all the way up to 6.1%
- In December 2023, it dropped back to 5.28%
As we write this in November 2024, this year’s best interest rate for equity release has been 5.47%. All these figures come from the Equity Release Council.
A higher or lower interest rate can make a difference to how much you’ll pay over the lifetime of your equity release product. But when you take it out, it should still be at a time that’s right for you. Don’t rush into it just because interest rates happen to have gone down a bit. It’s a long-term commitment that should be carefully considered.
Are equity release interest rates fixed?
Mostly, yes. Providers usually fix an equity release interest rate for a product’s lifetime. They’ll fix it at the time you release your money. So any regular interest payments you’ve chosen to make will never change. That’ll be the case even if there are general interest rate rises or high inflation.
A few providers offer variable interest rates. With those, your interest rate will of course change. But there’ll be an agreed cap on it, so you’ll always know the highest amount you’ll owe each month.
What affects the interest rates on equity release?
A wide range of factors can affect interest rates on equity release products. These may include:
Your home | Your finances | Your lifestyle |
---|---|---|
Where it is, what sort of condition it’s in, when and how it was built, how much it’s worth now, how its worth could change, etc. | Your current and future work and/or retirement income, your credit history, how the economy’s doing in general, etc. | Your age, how healthy you are, what sort of lifestyle you lead, whether you’re married or live with a partner, etc. |
One key point is that, when it comes to equity release, being in poor health can actually be helpful. Just like enhanced annuities, lenders might be able to give you a better deal. You could get a lower interest rate or a larger loan.
Will equity release interest rates fall?
That’s very hard to predict. The answer to it changes on a month-by-month basis. We’d recommend checking in with your financial adviser for their up-to-date thoughts on it. If you don’t already have one, you are going to need one – you can only take out equity release products through a qualified adviser. You can find one at the Unbiased website.
What other costs should I consider?
When you’re totting up the costs of this kind of mortgage, you’ll need to look at more than just equity release interest rates. UK borrowers usually also have to cover:
- Independent financial advice – you can only take out an equity release mortgage through a financial adviser.
- Set up payments – like a valuation fee, solicitors fees and arrangement or application fees, plus sometimes a transfer fee (some providers charge for transferring your money to you).
- Lender’s fees – most lenders will charge you a percentage of the value of your loan. Some might offer a fixed fee, which can come out at less than a percentage-based one.
You can look at our own lifetime mortgage Tariff of Charges to see how lender’s fees can work in practice. And our How much does equity release cost? article talks through all the costs we’ve outlined above in more detail.
When you’re choosing an equity release mortgage, make sure you take all these costs into account. And do take a broader look at any product or lender-specific terms and conditions. Remember also that you can only take out an equity release product once you’re 55 or older (over 50 for our Payment Term Lifetime Mortgage). They’re loans secured against your home. Any equity released can affect any means-tested benefits you’re getting. They don’t have to be paid back until you or the last remaining borrower die or move into full time care.
So, in summary you should always base any decision on an in-depth understanding of your choices. Understanding them and being sure that you’re getting the right product for you is very important. That’s why you can only take this kind of mortgage out through a financial adviser. If you don’t already have one, you can find one at Unbiased.
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