Best Lifetime Mortgage Rates in 2024 Compared & Reviewed
Download this blog as a PDF to revisit it whenever you want.
We’ll email you a copy.
Key Takeaways…
- Lifetime mortgage rates in the UK shift with the lender you pick, usually ending up steeper than regular mortgage rates because lenders wait for repayment until the property is sold.
- You’ll find both fixed and variable rates depending on the chosen plan, and your age, home value, how much you borrow, and the economy play big roles in setting your rate.
- Watch out: Higher rates mean faster debt growth, which can impact the home’s equity over time.
In 2024, the best lifetime mortgage interest rates vary by lender, reflecting market conditions and individual borrower circumstances. After a steady drop from relatively high levels until early 2022, rates have gradually started to rise again.
Despite these recent increases, average rates remain lower than the peaks seen in 2016.
Now could be a good time to consult an adviser about a lifetime mortgage, especially with the possibility of further base rate rises.
The team at Every Investor is dedicated to staying updated on the latest lifetime mortgage rates from certified lenders.
In This Article, You Will Discover:
Current rates range from 5.65% to 5.85%. 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 Interest Rates Determined?
A lifetime mortgage is a loan secured against your home, with interest rates determined by lender criteria and market conditions.
What Defines a Lifetime Mortgage?
A lifetime mortgage is defined as a loan secured against your home, designed for individuals over 55, allowing you to release a portion of your home’s value as cash while retaining ownership.
Unlike traditional mortgages, lifetime mortgages offer the option to make no monthly repayments—instead, the loan and accrued interest are typically repaid from your estate when you pass away or move into long-term care.
How Is Interest Calculated for Lifetime Mortgages?
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.
Interest is calculated and charged on a compound basis, meaning that interest is added to the initial loan amount and accrues on the total sum.
In other words
If you choose not to make monthly interest payments, the interest will compound over time, leading to interest being charged on interest.
The equity release rates offered by financial institutions can vary significantly based on individual circumstances, so it’s important to review your options carefully.
What Are the Current Lifetime Mortgage Interest Rates in the UK?
The current lifetime mortgage interest rates in the UK vary, reflecting the economic climate and lender competition.
What Are the Current Lifetime Mortgage Interest Rates in the UK?
Current interest rates for lifetime mortgages in the UK range from 5.65% to 5.85%*, depending on the provider and specific terms.
The average rate is around 6.1%, but this can fluctuate due to factors such as the Bank of England base rate, economic conditions, and lender competition, making it crucial to seek expert advice before committing to a lifetime mortgage to ensure you make an informed decision that aligns with your financial goals.
The interest rate you choose will significantly impact the total amount payable over the life of the mortgage—opting for a fixed rate provides stability, as payments remain constant regardless of market changes.
On the other hand
A variable rate may offer lower costs initially but carries the risk of future rate increases.
What is the Average Lifetime Mortgage Interest Rate in 2024?
The current average interest rate on lifetime mortgages is approximately 5.65% to 5.85%*.
The rate you are offered will depend on various factors, such as your loan-to-value ratio and the features included in your plan.
*While we regularly review our rates, they may have changed since our last update.
Understanding Interest-Only Lifetime Mortgage Rates
Interest-only lifetime mortgages allow you to pay off the interest during your lifetime, leaving the original loan to be repaid when the property is sold.
This can help keep the overall debt lower compared to a standard lifetime mortgage, where interest compounds on the full amount borrowed.
These rates are usually lower than standard lifetime mortgages, but it’s important to ensure you can afford the regular interest payments; if you stop paying, the interest will compound like a typical lifetime mortgage, potentially increasing the debt significantly.
How Do Lifetime Mortgage Rates Compare to Other Equity Release Products in 2024?
In 2024, lifetime mortgage rates often offer competitive options compared to other equity release products, depending on the borrower’s needs and market trends.
What Are the Current Equity Release Interest Rates in 2024?
In 2024, equity release interest rates generally range between 4% and 8%, depending on the provider, product type, and market conditions.
These rates are competitive, reflecting both the market dynamics and the increasing popularity of equity release among homeowners.
The best deals typically align with competitive benchmarks, so to secure the most favourable rates tailored to your financial situation, it’s advisable to compare offers from multiple providers.
How Do Interest-Only Equity Release Rates Compare to Lifetime Mortgage Rates?
Interest-only equity release rates and lifetime mortgage rates often align closely, but key differences can emerge based on product features and lender policies.
Lifetime mortgages typically offer fixed rates, providing stability and predictability for long-term financial planning.
Equity release usually comes with slightly higher rates due to the added flexibility and the option to defer repayments; however, lifetime mortgages that allow for interest payments may offer more competitive rates, reflecting the reduced risk to the lender.
Fixed Rates on Lifetime Mortgages
Rates on lifetime mortgages are often fixed, meaning that they are set at the beginning of the loan and remain the same for the duration of the loan period.
This means you will not experience the effects of interest rate changes with a fixed-rate equity release plan.
Variable Rates on Lifetime Mortgages
Variable rates on lifetime mortgages adjust with market conditions, offering potential savings but also posing risks of increasing costs over the loan’s duration.
However, it is an Equity Release Council requirement that variable rates on lifetime mortgages are capped, which means they will never exceed a predetermined level.
What Is a Lifetime Fixed Mortgage?
A lifetime fixed mortgage guarantees that your interest rate will never change, no matter how long you hold the mortgage.
This provides peace of mind, as your monthly payments (if any) or the overall loan won’t be affected by fluctuations in interest rates over time.
Fixed-rate lifetime mortgages can be a good option for those who prefer certainty and want to avoid the risk of rising interest rates; however, it’s worth considering that fixed rates may initially be higher than variable rates, so understanding your long-term needs is key.
How Are Interest Rates Calculated in Lifetime Mortgages? Understanding AER vs. MER
Interest rates in lifetime mortgages are calculated using the AER (Annual Equivalent Rate) for overall costs and the MER (Monthly Equivalent Rate) for monthly costs.
AER vs. MER: How Do They Differ in Lifetime Mortgages?
In lifetime mortgages, AER and MER differ in their calculation; AER reflects the yearly interest cost, while MER includes compound interest, offering a more accurate cost over time.
How Do Interest Rates Vary Across Different Types of Lifetime Mortgages?
Interest rates across different types of lifetime mortgages vary based on the loan’s features, borrower’s age, and property value, reflecting the diverse financial solutions available to homeowners.
Current types of lifetime mortgages include lump-sum lifetime mortgages, drawdown mortgages, flexible or voluntary payment options, interest-only mortgages, and capital and interest mortgages.
Lump-Sum Mortgages
With a lump-sum mortgage, you receive a lump-sum loan on which interest is payable.
The interest will accrue (or compound) if you do not make repayments, and these amounts will be added to the loan.
The loan amount, including the rolled-up interest, will then be repaid when your home is sold.
Drawdown Mortgages
With a drawdown mortgage, you will be able to release funds when you need them, giving you more freedom than with a lump-sum plan.
Releasing funds when you need them means you will save on interest, as interest will only accrue on sums released.
Flexible or Voluntary Payment
With a flexible or voluntary payment option, borrowers can choose to make voluntary payments to reduce the interest owed.
Any payments are ad hoc and not mandatory.
Interest-Payment Lifetime Mortgage
With an interest-payment lifetime mortgage, you can repay the interest monthly, preventing it from accruing and increasing the overall loan amount.
This setup keeps the initial loan amount constant, offering a way to mitigate the impact of compound interest over time.
It is an appealing option if you have a regular income and wish to preserve as much inheritance as possible for your beneficiaries.
How Do Market Trends Influence Lifetime Mortgage Interest Rates?
Market trends significantly influence lifetime mortgage interest rates by affecting lenders’ borrowing costs, with fluctuations reflecting economic conditions, central bank policies, and demand for these financial products.
How Do Market Trends Affect Lifetime Mortgage Interest Rates?
Market trends significantly affect lifetime mortgage interest rates, with factors such as inflation, economic policies, and the Bank of England’s base rate playing key roles in shaping lenders’ offerings.
During periods of economic stability, rates tend to be more favourable, reflecting lower risk; conversely, in turbulent times, rates may rise as lenders seek to manage their risk exposure.
Staying informed about market conditions is crucial when considering a lifetime mortgage, as it can help you secure a more competitive rate.
What Are the Best Lifetime Mortgage Interest Rates in 2024?
The best rates you can achieve in 2024 start at circa 5.65% to 5.85%*, but ultimately depend on lender offers, market conditions, and individual borrower profiles, presenting various opportunities for homeowners to unlock equity at competitive rates.
*Whilst we regularly review rates, these may have changed since our last update.
Your adviser will discuss your options with you.
An example of how your total debt could grow…
Is It Possible to Achieve a 4% Interest Rate in 2024?
Year | Loan amount | Interest at 4% | Total owed* |
---|---|---|---|
1 | £50,000 | £2,000 | £52,000 |
2 | £52,000 | £2,080 | £54,080 |
3 | £54,080 | £2,163 | £56,243 |
4 | £56,243 | £2,249 | £58,492 |
5 | £58,492 | £2,340 | £60,832 |
10 | £71,165 | £2,847 (£24,012) | £74,012 |
15 | £86,583 | £3,464 (£40,047) | £90,047 |
20 | £105,342 | £4,371 (£59,556) | £109,556 |
How Likely Are 5% Lifetime Mortgage Rates in 2024?
Year | Loan amount | Interest at 5% | Total owed* |
---|---|---|---|
1 | £50,000 | £2,500 | £52,500 |
2 | £52,500 | £2,625 | £55,125 |
3 | £55,125 | £2,756 | £57,881 |
4 | £57,881 | £2,894 | £60,775 |
5 | £60,775 | £3,039 | £63,814 |
10 | £77,766 | £3,878 (£31,444) | £81,444 |
15 | £98,996 | £4,950 (£53,946) | £103,946 |
20 | £126,347 | £6,317 (£82,664) | £132,664 |
*This is for indicative purposes only.
How Can You Calculate the Total Interest You Will Pay on a Lifetime Mortgage?
To calculate the total interest on a lifetime mortgage, you will need to consider the initial loan amount, the interest rate, and how long you plan to have the mortgage.
Most lenders provide calculators that can give you an estimated total, factoring in compound interest over the years.
Remember, making voluntary payments can reduce the interest accrued, altering the total amount payable over the life of the mortgage.
What Does Martin Lewis Say About Lifetime Mortgages?
Martin Lewis, a well-known consumer finance expert, often advises caution when it comes to lifetime mortgages and highlights that while they can be a useful option for accessing the value of your home, they aren’t suitable for everyone.
Lewis stresses the importance of understanding the long-term costs and how the interest compounds over time, so before committing to a lifetime mortgage, he recommends seeking independent financial advice.
He points out that comparing multiple providers and understanding the fine print can help you avoid unexpected costs and make sure this is the right decision for your future.
Frequently Asked Questions About Lifetime Mortgage Interest Rates
Is It Possible to Pay Off a Lifetime Mortgage?
What Costs Are Associated With a Lifetime Mortgage?
How Can I Calculate the Interest I Will Pay on a Lifetime Mortgage?
What Factors Affect the Interest Rate on Lifetime Mortgages?
What Are the Current Lifetime Mortgage Interest Rates in the UK?
How Do Lifetime Mortgage Interest Rates Compare to Regular Mortgage Rates?
Can Lifetime Mortgage Interest Rates Change Over Time?
What Factors Influence Lifetime Mortgage Interest Rates?
How Do Lifetime Mortgage Interest Rates Affect the Equity in My Home?
Concluding Insights on Lifetime Mortgage Interest Rates in 2024
Find a retirement solution that suits your needs while lifetime mortgage rates are still relatively low in 2024.
If you are considering a lifetime mortgage, consult an independent financial advisor who will be able to determine whether equity release is the ideal option for you.
Speak to an experienced equity release adviser to discuss the lifetime mortgage interest rates you could qualify for.
WAIT! Before You Go…
Free Equity Release Calculator
How Much You Can Release?
Found an Error? Please report it here.