If you are a UK homeowner aged 55 or older considering equity release, one of the most critical factors to understand is the interest rate applied to your plan.

Many lifetime mortgages available in July 2025 begin at around 6.23 % MER (monthly equivalent rate), roughly equivalent to a 6.3 % AER fixed for life. That rate will vary depending on your age, property value, and provider.

On average, the equity release APR across new plans reached approximately 7.24 % in Q2 2025, up from 6.64 % in Q2 2024. This increase reflects rising gilt yields and general economic conditions.

While equity release interest rates are higher than typical later-life mortgage rates, often by one to two percentage points, understanding how interest compounds, as well as the structure of early repayment charges and drawdown flexibility, can significantly impact your long-term costs⁴.

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What Are Equity Release Interest Rates?

An equity release interest rate is the percentage charged by a lender on a lifetime mortgage secured against your home. It determines how quickly the loan balance increases over time, particularly when interest is not repaid and is allowed to compound.

Most equity release products in the UK offer a fixed-for-life interest rate, meaning the rate agreed at the start will remain constant regardless of changes in the Bank of England base rate.

Interest is usually added monthly or annually and compounds over time, meaning you pay interest on both the original loan and previously accrued interest.

The way interest is applied and the total cost of borrowing can vary depending on several factors:

• Loan structure: You can choose between a lump sum or drawdown facility. Drawdown plans typically offer lower overall interest costs because interest is only charged on funds when they are withdrawn.
• Age and property value: Older applicants and higher-value homes can unlock better rates or higher borrowing amounts.
• Loan-to-value ratio (LTV): A lower LTV generally results in more competitive rates.
• Plan features: Options such as inheritance protection, voluntary repayments, or early repayment flexibility may affect the interest rate offered.

Equity release rates are higher than standard residential mortgage rates due to the lender’s extended risk and the open-ended nature of the agreement.

As of July 2025, the lowest available equity release rate was around 6.23% monthly equivalent rate, or approximately 6.3% annual equivalent rate.

How Do Rates Affect Lifetime Mortgages?

Interest rates directly influence the total amount repaid over time. When no repayments are made, compound interest builds quickly and increases the debt significantly.

Even modest differences in rate or payment strategy can have major implications:

• Interest growth accelerates debt: With compound interest, you pay interest on the initial sum and on previously added interest.
• Drawdown vs lump sum matters: Drawdown plans are cheaper because interest accrues only on withdrawn funds, not the full loan facility.
• Voluntary repayments reduce long‑term costs: Regular or one‑off repayments can slow or halt compounding, preserving more home equity.
• Age, equity, and features affect rate: Borrowers who are older or release smaller proportions of their home value (lower LTV) usually qualify for better rates.

Here is an example illustrating the impact of compounding interest:

Initial Loan	Interest Rate	Years	Amount Owed After Term
£50,000	6 % AER	15	~£119,828

This shows how a £50,000 lifetime mortgage at 6 % annual rate grows to approximately £119,828 after 15 years with no repayments⁴.

Current Equity Release Rates in the UK

Equity release interest rates in the UK as of mid‑2025 generally range from 5.95% to 6.95% Monthly Equivalent Rate (MER), or approximately 6.1% to 7.1% Annual Equivalent Rate (AER) depending on your circumstances and plan type.

The lowest advertised rate in July 2025 stood at 5.95% MER.

Drawdown lifetime mortgages typically offer slightly lower rates than lump sum plans because interest accrues only on funds actually withdrawn.

Interest rates are fixed for life, meaning your rate will not increase regardless of future changes in UK base rate.

Home reversion plans do not charge interest in the traditional sense.

Instead, you sell part of your property at a discounted value and retain the right to live in the home, while the provider takes a share of the sale later.

Sample Rates from Leading Lenders (July–May 2025)

Provider	Rate (MER)	Plan Type	Estimated AER
Aviva	6.07%	Lump Sum / Drawdown	~6.2%
Pure Retirement	6.26%	Lump Sum / Drawdown	~6.4%
Just Retirement	6.25%	Lump Sum / Drawdown	~6.4%
Canada Life	6.29%	Lump Sum / Drawdown	~6.4%

These rates are correct as of May to July 2025 and will vary depending on your age, the value of your home, and the loan-to-value ratio.

On average, the advertised equity release rate in Q3 2024 was 6.89% APR.

Post‑pandemic gilt yields and lender risk margins have contributed to moderating rate decreases by mid‑2025.

Why It Matters

• Rate differences, even small ones, can lead to thousands of pounds of difference in repayment totals.
• Lump sum products charge interest on the full amount from day one, whereas drawdown products only accrue interest on withdrawn sums.
• Knowing current rate ranges will help you compare real offers and zero in on realistic expectations in conversations with advisers.

Understanding How Equity Release Rates Vary Between Plans

While leading UK equity release providers offer interest rates that may appear similar, generally between 6.0% and 6.4% MER, there are important structural differences between the plans that explain these variations and determine long-term cost.

Key Factors That Influence the Rate You Receive

• Loan-to-Value (LTV) Ratio: Lower LTVs typically qualify for better rates because they represent less risk to the lender.
• Age and Health: Older applicants may qualify for enhanced terms or larger loan amounts due to a shorter expected loan duration.
• Plan Features: Adding options like voluntary repayments, inheritance protection, or downsizing protection can slightly increase your rate.
• Distribution Channel: Many of the most competitive rates are only available via brokers or intermediaries such as Age Partnership, not directly from the provider.

Decoding Product Names

Product names can be confusing without context. Here’s how to interpret common terms:

• "Ultra Lite" / "Super Lite": These plans offer the lowest available rates but also restrict the amount you can borrow.
• "Fixed ERC": Stands for Fixed Early Repayment Charges. These plans have a capped penalty period if you repay early, usually 8 to 15 years.
• "Flexible Lump Sum": Allows additional borrowing or partial repayments, which adds flexibility but may raise the base rate slightly.

Real-World Example

Two products from the same provider, such as Canada Life’s “Ultra Lite” and “Ultra Lite Plus”, may differ by 0.1% to 0.2% MER depending on LTV limits or access to additional features.

A 0.2% difference over 15–20 years can mean thousands of pounds in added interest, even on a modest loan.

Why This Matters

Many borrowers focus only on the headline rate, but the structure of the product, how you access the money, whether you can repay early, and what happens if you move home, often has just as much impact on long-term financial outcomes as the rate itself.

Learn More: Age Partnership Equity Release Review

Are Equity Release Rates Going Up or Down?

Equity release interest rates have increased steadily from 2023 to mid-2025, reflecting higher gilt yields, sustained inflation, and a rising Bank of England base rate.

While the upward trend continued into early 2025, rates remain below the peak levels of 2022⁵.

Historical Context and Current Trend

• In 2023, the Bank of England base rate rose sharply to 5.25%, prompting many lenders to adjust equity release products to keep pace. At that time, the average advertised equity release APR reached 6.89%⁶.
• By July 2025, the lowest available equity release rate had declined slightly to about 6.23% MER, or approximately 6.3% AER.
• Despite the recent softening in the lowest rate, most equity release plans remain clustered between 6.0% and 7.0% MER as rates have not returned to pre-pandemic lows.

Why This Trend Matters

• Equity release pricing typically mirrors long-term bond yields and base rate expectations. A rise in gilt rates or sustained inflation tends to push equity release rates higher.
• Slower growth in new lifetime mortgage lending, down 40% in Q4 2023 compared to 2022, suggests that affordability limits and risk perception are influencing uptake.
• Market data from Q1 2025 shows year-on-year lifetime mortgage origination up 11% by volume (£530m total value), indicating renewed confidence despite elevated rates⁷.

Although equity release interest rates peaked near 7.0% during late 2023 and early 2024, they have since eased slightly to the 6.2%–6.4% MER range.

For homeowners, the path forward likely depends on how soon gilt yields and inflationary pressures ease. If base rate cuts materialize later in 2025, equity release rates may follow, but substantial reductions are not guaranteed.

This timeline equips you with context on where rates have been and what might be ahead.

Read On: The History of Equity Release

Will Equity Release Rates Rise or Fall?

Equity release interest rates in the UK are closely linked to broader economic trends such as gilt yields, the Bank of England’s base rate, inflation, and economic growth forecasts.

Market expectations suggest that base rates will continue to fall through the rest of 2025, which is likely to ease pressure on equity release rates.

Key Indicators Influencing Future Rates:

• Bank Rate Outlook
  As of July 2025, the Bank of England base rate stood at 4.25%. A recent Reuters poll predicts two further cuts, to 4.00% in August and 3.75% by year-end. Fidelity and several analysts expect a gradual decline over 2025.
• Gilt Yields over Bank Rates
  Equity release pricing is determined more by long-term gilt yields than immediate base rate levels. While gilt yields have begun to contract, forecasts suggest that 10-year yields could drop from recent highs of 4.9% back toward 4.0% by late 2025, which would likely reduce equity release rates.
• Economic Outlook for Mortgage Demand
  Though lending dipped in late 2023, new lifetime mortgage lending rebounded in early 2025 with an 11% year-on-year growth in volume, demonstrating restrained confidence under current rate conditions.

Forecast Summary Table:

Indicator	Forecast / Trend
Bank of England Rate	Expected to fall to ~3.75% by late 2025
Gilt Yields	Projected to decline toward ~4.0%
Equity Release Rates	Likely to ease back into the 6.0%–6.3% MER band
Market Lending Volumes	Early 2025 uptick reflects stabilising demand

What This Means for Homeowners:

If gilt yields and base rates continue their downward path, equity release interest rates may gradually decline. However, reductions are likely to be moderate rather than dramatic.

For borrowers, this means that:

• If you expect further cuts, choosing a drawdown product could let you access funds gradually at lower future rates.
• Making voluntary repayments can reduce compound interest exposure.
• Securing a fixed-for-life rate now might protect you from any short-term instability, locking in costs before further shifts occur.

Common Questions

In Conclusion

Finding the best equity release interest rate in 2025 is not just about comparing percentages. It requires understanding how fixed rates, compounding interest, product structure, and economic trends influence your total repayment and long-term financial position.

Rates in 2025 typically range between 6.0% and 6.4% MER, depending on your age, home value, and product choice. Choosing the right plan means balancing the interest rate with flexible features like voluntary repayments, inheritance protection, or drawdown access.

By reviewing real market data, understanding how rates behave over time, and considering the broader financial context, you’re better equipped to make a decision that aligns with your goals, whether that’s maximising retirement income, preserving inheritance, or maintaining long-term control over your home equity.

Before committing, speak to a qualified equity release adviser, review the actual cost projections, and compare deals across providers, not just on rate, but on features that protect your future.

* Please note that while the rates mentioned in this article were accurate at the time of publication, they are subject to change and may have varied since then.