Lifetime mortgage rates are rising slightly in 2022.

If you don’t act fast by joining the over 76,000 UK homeowners who unlocked equity in 2021¹.

You might lose out on the cheapest rates that you’ll find over the next few years.

Fortunately, our expert team has done the research for you, and we’re here to be your guide.

At SovereignBoss, we’re constantly keeping our finger on the equity release pulse, regularly reviewing the interest rates for products by regulated providers.

Here’s the latest scoop.

What’s the Average Interest Rate on a Lifetime Mortgage?

The current average interest rate on a lifetime mortgage is just over 5%.

However, rates can start from as low as 4,17% (AER), and rise to 7.39%.

View the most current rates here.

In March 2021, lifetime mortgage interest rates were at an all-time low, but have since risen.

*While we regularly review these interest rates, they may have shifted since our last review.

Best Lifetime Mortgage Rates at 2022

Check out details of the best lifetime mortgage interest rates you could currently achieve:

Lifetime Mortgage Rates – Aug 2022

Plan Provider	Fixed Monthly Interest Rate From	Annual Rate (AER) From	Maximum Loan-To-Value	Maximum Equity Offered
Legal & General	4.33%	4.50%	38%	£2,000,000
More2Life	4.27%	4.43%	32%	£1,000,000
Canada Life	4.37%	4.60%	28.8%	£1,000,000
Pure Retirement	4.22%	4.30%	33.5%	£725,000

Note: The maximum equity offered is subject to your circumstances and based on the value of your home.

*Last updated in line with the Equity Release Council’s Spring Equity Release Report².

This maximum is the cap available for higher valued properties.

How Is Interest Calculated on a Lifetime Mortgage?

Interest on a lifetime mortgage is usually calculated daily and based on a fixed rate, meaning that the amount doesn’t change throughout your life.

Rolling interest can cause your loan amount to increase drastically over time.

The interest will reduce the equity available in your home, especially if your lifetime mortgage spans a considerable period.

Examples of How Compound Interest Works on Lifetime Mortgages

The following are examples of the impact caused by interest, based on rates of 4%, and 5%.

£50,000 Loan on a 4% Annual Interest Rate (AER)

Year	Loan Amount	4% Interest AccruedThe interest on a bond or loan that has accumulated since the principal investment, or since the previous coupon payment if there has been one already.	Total Amount 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	£74,012
15	£86,583	£3,464	£90,047
20	£105,342	£4,371	£109,556

4% interest is an average rate, but it’s higher than what one might achieve with a traditional mortgage.

Annual interest on a £50,000 loan would be £2,000, but if left unpaid, it will compound.

£50,000 Loan on a 5% Annual Interest Rate (AER)

Year	Loan Amount	5% Interest AccruedThe interest on a bond or loan that has accumulated since the principal investment, or since the previous coupon payment if there has been one already.	Total Amount 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	£81,444
15	£98,996	£4,950	£103,946
20	£126,347	£6,317	£132,664

If you’re on the younger side and your loan amount is small, you can expect to pay around 5% interest or more.

A year on 5% interest is £2,500, but that’s before it compounds.

Different Lifetime Mortgage Interest Rates

There are 5 different lifetime mortgage rates and how you can approach payments.

These include roll-up mortgages, drawdown mortgages, flexible or voluntary payments, interest only mortgage rates, and capital and interest mortgage rates.

Here’s more details about each.

Roll-up Mortgages

Roll-up mortgages are the standard lifetime mortgage interest rates.

The interest will continue to compound and be added to the loan amount.

The total is then covered by selling your house when you pass away or enter long-term care.

There’s more!

The ‘no negative equity guarantee’, implemented by the Equity Release Council³, ensures your family will never owe more for your property than its final sale price.

This is even if property prices plummet.

Drawdown Mortgages

With a drawdown lifetime mortgage, you’ll agree on a set amount with your lender that will be placed in a drawdown facility.

Your lender will then release funds to you on request, and interest will only be charged on the money you withdraw.

The trick is only to take out money that you know you’ll need in the foreseeable future.

There will be a minimum you can withdraw each time, sometimes around £5,000.

Flexible or Voluntary Payment

Flexible or voluntary repayment lifetime mortgages means you’ll reduce the loan amount by paying some of it off.

Fortunately you can stop and start payments whenever you wish.

Interest-Only Mortgage Rates

Interest-only mortgage rates may be lower than those of a plan where monthly payments aren’t required.

Capital & Interest Mortgage Rates

Paying the maximum capital allowed and monthly interest rates on your lifetime mortgage loan is the way to achieve the cheapest possible overall costs.

What’s the Maximum Age for a Lifetime Mortgage?

The maximum age for a lifetime mortgage is somewhere between the age of 85 and 95.

If you are closer to that age, your financial adviser might find a lender that will accept your age category or have no age cap.

What Is the Best Interest Rate on a Lifetime Mortgage?

The best interest rate on a lifetime mortgage in Aug 2022 is 3.67% (AER) and it’s fixed for life.

Common Questions

In Conclusion

With the best equity release interest rates so low in 2022, lifetime mortgages can be an incredible way to beat the retirement financial blues.

However, releasing equity sitting in your property is a big decision, and it shouldn’t be done without serious consideration.

Contact a financial advisor to help you find the best lifetime mortgage rates achievable.

Editor’s Note: The information contained in this website is for general information purposes only & while we endeavor to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk. This content has been independently collected by the SovereignBoss team and is offered on a non-advised basis. View our editorial guidelines.

Spotted a Mistake? Let us know here.