Are Equity Release Interest Rates Competitive in 2022 ?

Are Equity Release Interest Rates Competitive Enough? Learn the Truth

Contributors: Nicola Date, Katherine Read. Edited by Rachel Wait & Reviewed by Francis Hui

Before You Sign Up for Equity Release, It's Vital to Understand How Interest Rates & Costs Will Affect Your Monthly Payments. Check This Out!

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Are Equity Release Interest Rates Competitive? The Answer Might Suprise You

Homeowners, particularly in these difficult times, are looking for ways to make money. Sound familiar?

Equity release mortgages could be a fantastic solution for those struggling financially. But you could seriously miss out if you aren’t aware of this vital information about equity release interest rates.

We’ll help you discover:

  • If equity release interest rates are competitive in May 2022.
  • If equity release is worth the pitfalls.
  • If equity release is another financial product to steer clear of.
  • How rates fair in comparison to other mortgage solutions.

SovereignBoss is all about helping you find the most comfortable retirement solutions. We’re regularly reviewing the interest rates to bring you the latest news.

Let’s take a look!

Initial Costs of Equity Release

The initial costs of equity release vary depending on which provider you choose and which product you go for. These costs include legal fees, application fees, and advice fees.

Here’s more information:

  • Advice fees Typically, you may expect to pay for financial advice from a professional who will research the various possibilities and recommend the best plan for you.
  • Application fees – The application charge, also known as the arrangement fee1, is comparable to a traditional mortgage.
  • Legal costs – When creating your equity release plan, it usually covers the setup and legal charges incurred by the provider. Fees vary depending on the lender.

Equity Release Interest Rates in 2022

The amount of interest you pay at the end of your lifetime mortgage is determined by how long it has been in place.

Your mortgage can stop when:

  • You sell your house – In such cases, you’ll likely incur penalties known as early repayment charges.
  • Pass away – Equity release is intended to last for life. When you and your spouse (if it’s a joint plan) die, the home is sold and the loan, plus interest, is settled from the sale.
  • Enter long-term care – The same procedure will take place as when you die – the home will be sold, the lender will collect their share, and your heirs will claim the balance.

This is regardless of the type of equity release plan and the interest rate you select.

For example, with a roll-up lifetime mortgage that gives you tax-free cash in one lump sum, the interest on your loan is compounded each month or year, depending on the plan you choose.

As a result, the amount you owe to your lifetime mortgage provider increases year after year.

Interest on equity release will start at 3% AER with the cheapest providers.

Low Interest Rates on Equity Releases Have an Impact on Your Payments

Equity release requires no compulsory loan or interest payments. Instead, everything is due when the plan ends.

Your family can use other means, but equity release is usually repaid from the sale of your home.

If you have life insurance set up, you can arrange to have those funds repay your equity release, leaving your estate intact.

Because equity release is tax-free, selecting the optimum interest rate will significantly impact what you will pay at the end of the loan.

Reducing the Cost of Equity Release

Many people are under the misconception that equity release is a costly and complicated process, but thankfully, you can reduce these costs with proper research and the right product.

  • Obtain the best interest rate possible – Even small percentage differences in interest rates can compound over many years and make an enormous difference. But, a better-rated feature may not always be compatible with your needs or budget, and vice versa.
  • Make monthly interest payments to keep the loan from growing – Interest charges on loans compound over time. There are a variety of repayment plans available in 2022.
  • Consider using drawdown – Instead of taking everything as a lump sum payment upfront.
  • Choose a product from an Equity Release Council member – This way, your best interests will be taken into account.

Is Equity Release a Smart Idea?

Equity release could be a smart idea for those who want to help their loved ones financially or have additional retirement income.

With an equity release mortgage, you can borrow the value in your home without having to move and there are no monthly repayments.

However, it’s not for everyone so it’s essential to contact a financial adviser.

How Do Equity Release Interest Rates Compare to Regular Mortgage Interest Rates?

Regular mortgage rates start at 3.1%, and rates under 4% are achievable with equity release.

Interest rates as low as 2.3% were available in March 2021, but they have since increased.

In addition, it’s important to remember that you’ll be making monthly payments on your traditional mortgage.

Common Questions

How Much Are Solicitors Fees for Equity Release?

How Does the Interest Work on Equity Release?

In Conclusion

Taking money out of your home through equity release is a big financial decision, so you should do as much research as possible before making the final call.

You should consult a financial adviser who can talk you through the details, including how much it will cost to use equity release.

You’ll learn if this is a good option for your situation and make an informed decision.



Editorial Note: This content has been independently collected by the SovereignBoss advisor team and is offered on a non-advised basis. Sovereignboss may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.

rachel w

Rachel Wait
Personal Finance Journalist

Rachel is an experienced finance journalist and editor with a particular interest in personal finance and consumer affairs. She has vast experience writing about money issues, property, insurance, and consumer affairs, and you’ll find her articles regularly featured in top media and newspaper publications.
John Lawson

Written by
John Lawson
Founder SovereignBoss

John is passionate about education and has made it his life-long mission to assist UK citizens on their future financial options, with a specialist interest in equity release, and SovereignBoss is the natural extension of this passion.

Reviewed by
Francis Hui
Senior Risk Manager

Having held various high-level roles across the industry, Francis is truly an expert in aiding UK citizens in their financial decisions and risk analysis. His unique insight and statistical knowledge make him the perfect person to help you take your financial future to the next level.
kath icon

Katherine Read
Consumer Affairs Writer

Since joining the editorial team at SovereignBoss, Katherine has become focused on bringing transparency to finances and opportunities for those approaching retirement age. She writes on the topics of equity release, home reversion, and mortgages.

Nicola Date
Writer & Journalist

Nicola is a financial writer for SovereignBoss and is passionate about the opportunities that equity release can open up for homeowners. Her extensive business experience and deep understanding of the industry means that she’s always up-to-date with the latest developments.

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