What Are the Best Lifetime Mortgage Interest Rates in 2024?

Are You Looking for the Best Lifetime Mortgage Interest Rate? Find Out What Affects the Interest Rate Charged and the Difference Between Variable and Fixed Interest Rates. Read This So You Do not Get Caught.
  • Last Updated: 07 Feb 2024
  • Fact Checked
  • Our team recently fact checked this article for accuracy. However, things do change, so please do your own research.

Contributors:

Francis Hui

Key Takeaways

  • The current lifetime mortgage interest rates in the UK vary depending on the lender, but as of 2021, they typically range from 2.5% to 5%.
  • Lifetime mortgage interest rates are often higher than regular mortgage rates due to the added risk for lenders of not receiving any repayments until the homeowner passes away or moves into long-term care.
  • The interest rates can change over time, depending on whether you choose a fixed or variable rate plan.
  • Factors that influence interest rates include the homeowner's age, the property value, the loan amount, and the broader economic conditions.
  • The higher the interest rate, the faster the mortgage debt will grow, potentially reducing the amount of equity remaining in your home.

Lifetime mortgage interest rates saw a steady drop from relatively high levels until early 2022 when they started rising again slowly.

Despite recent increases, average rates are still lower than the average highs seen in 2016.1

Now may be a good time to speak to an advisor about a lifetime mortgage, as the Bank of England's expected to keep raising the base rate, which means rates are likely to rise again.

In This Article, You Will Discover:

    The team at Every Investor takes pride in keeping abreast of the most recently available lifetime mortgage rates from certified lenders.

    Rates currently range from 5.38% to 6.49%*. View the equity release interest rates here.

    *While we regularly review our rates, these may have changed since our last update.

    Learn more here!

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

    Interest rates for lifetime mortgages in the UK currently range from 2.5% to 6.5%, depending on the provider and the specific terms of the mortgage.

    We've observed that the average rate is roughly 4.5%, although this value may fluctuate due to factors such as the Bank of England base rate, economic climate, and lender competition.

    The interest rate chosen will significantly impact the total amount payable over the life of the mortgage.

    Opting for a lifetime mortgage with a fixed interest rate can offer reassurance, as payments remain constant regardless of changes in the market.

    Conversely, a variable rate could potentially reduce costs, but it also carries the risk of rate increases. Remember, it's essential to seek expert advice before committing to a lifetime mortgage.

    What Is the Average Interest Rate for Lifetime Mortgages?

    The current average interest rate on lifetime mortgages can be expected to be roughly between 6.05% and 7%*.

    The rate you are offered will depend on different factors, such as your loan-to-value ratio and the features included in your plan.

    *While we regularly review our rates, these may have changed since our last update.

    What Are the Current Equity Release Interest Rates in 2024?

    The overall market environment in 2024 has had an impact on interest rates for equity release products, including lifetime mortgages, with a range that reflects both the economic environment and competitive pressures within the industry.

    Generally, you can expect rates to vary widely based on the lender and the specific product features, with some of the best deals hovering around competitive benchmarks.

    Always check with multiple providers to find the most favourable rates tailored to your financial situation.

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

    Equity release mortgage rates and lifetime mortgage rates often align closely, but differences can emerge based on product features and lender policies.

    Equity release, encompassing both lifetime mortgages and home reversion plans, typically offers rates slightly higher due to the added flexibility and no required repayments.

    However, lifetime mortgages, especially those that allow for interest payments, might offer more competitive rates to reflect the reduced risk to the lender.

    How Is Interest Calculated for Lifetime Mortgages?

    Interest on a lifetime mortgage is usually calculated based on a fixed interest rate agreed to when your provider makes an offer.

    Variable rates are also available, but they will be capped.

    Interest is calculated and charged on a compound basis.

    This means that interest is calculated on the initial loan amount plus any interest accruing on that initial capital sum.

    In other words, you'll be accruing interest on interest if you choose not to make monthly interest payments.

    Fixed Rates on Lifetime Mortgages

    Rates are often fixed, which means they're set at the beginning of the loan and remain the same for the duration of the loan period.

    With a fixed-rate equity release plan, you won’t be affected by interest rate fluctuations.

    Variable Rates on Lifetime Mortgages

    Some lifetime mortgages come with variable rates, which means these plans will be affected by rising rates of interest.

    However, it's an Equity Release Council requirement that variable rates on lifetime mortgages are capped, which means they will not ever exceed a predetermined level.

    AER vs. MER: How Do They Differ in Lifetime Mortgages?

    AER is the Annual Equivalent Rate and MER is the Monthly Equivalent Rate. 

    AER represents the interest added over one year.

    MER is used to indicate the interest added over one year divided by 12 months.

    How Do Interest Rates Vary Across Different Types of Lifetime Mortgages?

    Rates on lifetime mortgages differ depending on the type of plan you choose.

    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 roll up (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 lifetime mortgage, you’ll be able to release money when you need it, giving you more freedom than with a lump-sum plan. 

    Releasing funds when you need them means you'll 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 aren’t mandatory.

    Interest-Payment Lifetime Mortgage

    An interest-payment lifetime mortgage allows you to pay the interest monthly, preventing it from rolling up 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's 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 Affect Lifetime Mortgage Interest Rates?

    Market trends play a significant role in shaping the interest rates for lifetime mortgages, with factors such as inflation, economic policies, and the Bank of England's base rate influencing lenders' offerings.

    During periods of economic stability, you might find rates more favourable, reflecting lower risk.

    Conversely, turbulent times can lead to higher rates as lenders aim to manage their risk exposure, making it crucial to stay informed on market conditions when considering a lifetime mortgage.

    What Are the Lowest Interest Rates for Lifetime Mortgages in 2024?

    The best rates you can achieve in 2024 start at around 5.25%*.

    *While we regularly review rates, these may have changed since our last update.

    However, a number of factors, such as how much you'd like to borrow and the type of plan you ultimately choose, will affect the best interest rate you could get on a lifetime mortgage.

    Your adviser will discuss your options with you.

    Here’s an example of how your total debt could grow:

    Is It Possible to Achieve a 4% Interest Rate in [SEO_DATE_YEAR]?

    YearLoan amountInterest 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% Interest Rates for Lifetime Mortgages in [SEO_DATE_YEAR]?

    YearLoan amountInterest 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'll 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.

    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’re considering a lifetime mortgage, consult an independent financial advisor who'll be able to determine whether equity release is the ideal fit for you.

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

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