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.

What is the interest rate on equity release?

There’s no single interest rate for equity release products. Different lenders will offer different rates on each one. They’ll base them on the Bank of England’s base rate, which has climbed from 0.75% in March 2020 to 4% in February 2023.

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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. Equity Release Council (ERC) approved products have a no-negative-equity guarantee.

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.

Are equity release interest rates rising?

Yes. Like residential mortgage interest rates, equity release rates of interest have risen. These equity release interest rates (2022) will show you how that played out back then:

  • between January and August 2022, the average equity release interest rate rose from 4.10% to 5.74%
  • in October 2022, the average equity release interest rate hit 7.55% - with some mortgages as high as 9%.


But it’s worth noting that, if you take a lifetime mortgage out, your lender will fix your interest rate at that moment. So once the mortgage is up and running, its rate will never go up or down.

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 the interest rate on equity release products. These 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.

How much could you release?

Interested in equity release? Find out how much you could release with our quick and easy equity release calculator.

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. If you don’t already have one, you can find one at Unbiased.
  • 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. They’re loans taken out against your home. Any income from them 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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