In 2025, lifetime mortgage interest rates in the UK range from 5.97% to 6.28%, depending on the provider, product type, and borrower profile. These rates have edged upwards since late 2022, reflecting inflationary pressures and recent increases to the Bank of England’s base rate³.

Despite these rises, current averages remain below the 2016 peak of approximately 7.2%, presenting a comparatively favourable environment for eligible homeowners.

Given the likelihood of further base rate increases, many advisers recommend securing competitive rates now while options remain more accessible.

Whether you're considering equity release for the first time or looking to optimise your existing plan, understanding how lifetime mortgage interest rates work is essential.

This guide distils the latest 2025 market data, lender comparisons, and repayment strategies—giving you the clarity and confidence to make informed decisions about your financial future.

Current rates range from 5.97% to 6.28%. Please note that, while we regularly review our rates, they may have changed since our last update.

What Is a Lifetime Mortgage and How Are Rates Set?

A lifetime mortgage is a regulated equity release product designed for UK homeowners aged 55 or over. It lets you unlock tax-free cash from your home—either as a lump sum or through a drawdown facility—without needing to move or sell.

You retain full ownership, and the loan plus compound interest is typically repaid when you pass away or move into long-term care.

How Do Lenders Set Lifetime Mortgage Rates...

Interest on a lifetime mortgage is typically calculated at a fixed rate agreed upon when your provider makes an offer, and although variable rates are available, they are capped, ensuring some level of predictability.

Rates are determined based on several key factors:

• Your Age – Older applicants are typically offered lower interest rates.
• Loan-to-Value (LTV) – Borrowing a smaller percentage of your home's value can secure a better deal.
• Property Type and Location – Some property types (e.g. ex-local authority flats) may be excluded or attract higher rates.
• Plan Type – Whether the product is lump sum, drawdown, flexible, or interest-payment affects pricing.
• Market Conditions – Lenders factor in the Bank of England base rate, inflation forecasts, and gilt yields.

What Are the Current Lifetime Mortgage Interest Rates in the UK?

Current interest rates for lifetime mortgages in the UK range from 5.97% to 6.28%*, depending on the provider and specific terms.

Typical Lifetime Mortgage Interest Rates (MER) in 2025

Age	MER (Lump Sum Plan)	MER (Drawdown Plan)
55	6.29%	6.29%
60	6.29%	6.29%
65	6.29%	6.29%
70	6.29%	6.29%
75	6.29%	6.29%
85	6.31%	6.31%

📌 Note: These rates are indicative only and may vary based on lender, LTV band, or applicant details. While we regularly review our rates, they may have changed since our last update.

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Are You Wondering Why Do Rates Stay Flat Across Ages?

Most lifetime mortgage lenders use age-banded pricing—for example, one rate for all borrowers between 55 and 75, and a different one for 76+.

The minimal variation in MER across ages reflects this simplified tiered approach. Higher LTV borrowing or lower property values may push rates toward the 6.5–6.8% range².

How Is Interest Calculated on Lifetime Mortgages (AER vs. MER)?

When comparing lifetime mortgage products, it's essential to understand how interest is calculated.

Two key figures come into play: the Monthly Equivalent Rate (MER) and the Annual Equivalent Rate (AER).

MER vs. AER Explained

Term	Definition	Used For
MER	The nominal monthly rate at which interest is added to your loan	Quoted by most lenders as the product’s base rate
AER	Reflects the total amount of interest charged over a year, including compounding	Shows true cost of borrowing annually

In simple terms:

MER is what lenders quote.

AER is what you’ll actually pay.

For example, a product with a 6.29% MER will have an AER of around 6.47%, due to monthly compounding—interest being charged on interest.

Why Compound Interest Matters

With most lifetime mortgages, if no interest payments are made, the loan grows exponentially over time. This is because the interest that’s added each month becomes part of the balance that earns interest in the next month.

Example: A £100,000 loan at 6.29% MER will grow to:

• £114,892 after 2 years
• £147,854 after 7 years
• £195,861 after 12 years

(All figures use AER for compounding and assume no voluntary repayments.)

💡PRO TIP: Use an equity release calculator before committing, to compare how different MERs impact your long-term loan balance. You can adjust for age, LTV, and repayment preferences to tailor the results.

How Interest Rates Differ by Lifetime Mortgage Type

Lifetime mortgage interest rates can vary significantly based on the repayment structure and drawdown flexibility of the plan:

Mortgage Type	Typical Rate (MER)	Key Features
Lump-Sum	6.25%–6.35%	Full release upfront; highest interest exposure
Drawdown	6.10%–6.29%	Pay interest only on drawn funds; lower long-term cost
Voluntary Payment	6.15%–6.30%	Allows partial repayments; interest impact reduced
Interest-Payment	5.95%–6.10%	Fixed monthly interest payments; debt balance stays level
Capital & Interest (rare)	Custom	Combines repayment with amortisation; low use in UK

📌 Note: Rates shown are indicative as of 2025 and vary by lender, age, and LTV band.

This structure not only informs but aligns directly with the interest rate comparison theme of the article.

Choosing between these product types isn't just about interest rates—it’s also about how and when interest is applied.

Why Do the Rates Vary?

• Exposure & Risk: Lump sum products expose lenders to full loan value upfront—hence higher rates. Drawdown and interest-payment plans reduce risk through deferred or regular payments.
• Flexibility vs. Cost: Plans offering flexibility (voluntary payments, drawdown) marginally reduce compound interest—but lenders price this in.
• Regulatory Caps & Features: Some providers (e.g., More2life) offer rate reductions on interest-payment plans, helping retain estate value

Mapping your cash flow and repaying accordingly can significantly reduce long-term borrowing costs.

How Do Lifetime Mortgage Rates Compare to Other Equity Release Options?

Lifetime mortgages are the most common type of equity release in the UK, but they aren’t the only option.

Other products, like home reversion plans or hybrid schemes, differ not only in structure but also in how interest—or value—is calculated.

Lifetime Mortgage vs. Other Equity Release Products

Product Type	Typical Rate/Return (Jun 2025)	How It Works
Lifetime Mortgage	5.97%–6.28%¹ (fixed MER)	Interest charged on loan; repaid on death/sale.
Interest-Payment Plan	5.95%–6.10%¹	Regular interest payments; loan balance remains stable.
Drawdown Lifetime Plan	6.10%–6.29%¹	Lower long-term cost as interest only applies to released funds.
Home Reversion	No interest; you sell part of your home	Lender gets share of home sale value; no interest, but you lose property value.
Hybrid Equity Release	Custom	Mixes drawdown with repayment flexibility—rate depends on configuration.

What are the Key Differences Though?

• Lifetime mortgages accrue interest (compounded monthly), which affects how quickly the loan grows.
• Home reversion has no interest, but you permanently sell part (or all) of your property at below market value.
• Drawdown plans typically lead to lower cumulative interest, as less is borrowed upfront.
• Interest-payment plans are often cheapest long-term—if you can manage regular payments.

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Which Is Right for You?

Need	Best Fit
Max cash upfront	Lump-sum lifetime mortgage
Long-term cost control	Interest-payment plan
Preserve estate value	Home reversion or low-LTV drawdown
Flexibility with capital access	Hybrid or drawdown plan
No monthly commitments	Lump-sum or standard drawdown

💡PRO TIP: Always compare real costs—including the AER—and how each option affects your estate or future flexibility.

How Do Market Trends Affect Equity Release Interest Rates?

Lifetime mortgage interest rates are closely tied to broader economic conditions.

Lenders adjust pricing based on the cost of capital, inflation expectations, and overall market risk—just like with residential mortgages, but with longer-term exposure in mind.

Key Market Drivers

Market Factor	Impact on Lifetime Mortgage Rates
Bank of England Base Rate	When base rates rise, lenders' borrowing costs increase, often pushing equity release rates higher.
Inflation & Gilt Yields	High inflation or rising gilt yields signal risk—prompting lenders to raise rates for protection.
Economic Uncertainty	Periods of volatility (e.g. post-Brexit, pandemic, stagflation) typically result in more expensive, conservative lending terms.
Lender Competition	In more stable times, competition may drive down rates, especially for high-LTV or interest-payment plans.

Example: Market Impact Timeline

Year	Key Event	Effect on Rates
2016	Post-Brexit vote uncertainty	Rates peaked near 7.2%²
2020	COVID-19 stimulus & low base rates	Rates fell to 4.5%–5.2% range
2022	Start of inflationary period	Base rate rises began
2024–25	Continued inflation & rate hikes	Rates now average 6.1%

2025 Outlook

As of 2025, the Bank of England base rate remains around 5.25%, with further increases possible if inflation persists. This has already influenced lenders to raise rates across most equity release products, particularly lump-sum and high-LTV plans.

💡PRO TIP: Monitoring the base rate and gilt yields can help anticipate future rate shifts—valuable if you’re considering delaying your application.

How Do Lifetime Mortgage Rates Impact Total Debt Over Time?

Lifetime mortgage rates have a compounding effect—meaning the longer the loan runs without repayment, the more your total debt grows.

Even a small difference in interest rate can have a major impact over 10, 15, or 20 years.

Compound Interest in Action

Let’s look at how different interest rates affect a £50,000 loan over time, assuming no repayments are made:

Loan Growth at 4% Interest (AER)

Year	Loan Value
Year 1	£52,000
Year 5	£60,832
Year 10	£74,012
Year 15	£90,047
Year 20	£109,556

*This is for indicative purposes only.

Loan Growth at 5% Interest (AER)

Year	Loan Value
Year 1	£52,500
Year 5	£63,814
Year 10	£81,444
Year 15	£103,946
Year 20	£132,664

*This is for indicative purposes only.

Insight: Just a 1% higher interest rate results in over £23,000 more debt after 20 years on a £50,000 loan.

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Why Does This Matter?

Even modest repayments (e.g. £50/month) can significantly reduce final loan size—use a calculator to model this impact over time.

• Higher rates = faster erosion of equity
• Estate value shrinks—especially if no repayments are made
• Options like interest-payment or drawdown can reduce long-term costs

How Can I Estimate the Total Interest on a Lifetime Mortgage?

Estimating the total interest you’ll pay on a lifetime mortgage depends on three main variables:

1. Initial loan amount
2. Interest rate (MER/AER)
3. Loan duration (how long the mortgage runs before repayment)

Because interest is typically compounded monthly, the cost can rise sharply if no repayments are made.

Quick Estimate Example

Let’s say you take a £80,000 lifetime mortgage at a fixed 6.1% AER:

Loan Duration	Estimated Total Repayable	Total Interest Paid
10 years	£145,000	£65,000
15 years	£195,000	£115,000
20 years	£262,000	£182,000

NOTE: These are estimates assuming no voluntary payments and monthly compounding. To get personalised figures, use a reputable equity release interest calculator.

Input your age, property value, and loan size to see:

• Your total estimated cost
• How much equity might remain in your home
• The impact of voluntary or interest-only payments

💡PRO TIP: Review both MER and AER when comparing quotes. The AER gives a more realistic picture of what you’ll owe over time.

Lifetime Mortgage FAQs

Final Thoughts on Choosing a Lifetime Mortgage in 2025

With interest rates for lifetime mortgages rising again after historic lows, 2025 presents a pivotal moment for homeowners exploring equity release.

While current rates remain below the 2016 peak, they’re climbing in response to economic pressure and base rate increases.

Choosing the right product—whether it’s a lump sum, drawdown, or interest-payment plan—can significantly affect how much you or your estate will ultimately repay.

Speak to an experienced equity release adviser to discuss the lifetime mortgage interest rates you could qualify for.