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Comparing lifetime mortgage deals

What are the best interest rates available for lifetime mortgages and what factors could impact this?

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 15th April 2019* | Published: 7th February 2019

What are the best lifetime mortgage rates?

We receive lots of enquiries every day requesting information relating to lifetime mortgage interest rates.

The good news is interest rates aren’t really such a significant factor for lifetime mortgages as they are with traditional mortgages, as you will see when you read through the details in this article

Once you’ve read through the information below, make an enquiry and we will arrange for an expert who specialises in this area to speak with you directly.

In this article we will cover:

If it’s general information about lifetime mortgages you’re looking for, check out our comprehensive guide to them here.

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How are lifetime mortgage interest rates determined?  

In order to adhere to the code of conduct outlined by the Equity Release Council, most lifetime mortgage interest rates offered by member lenders are either fixed or rate-capped.

All interest accrued is rolled-up on top of the original amount borrowed and repaid in full when the property is eventually sold. Some lenders offer a voluntary repayment option to service the interest during the life of the mortgage.

What are the best interest rates available for lifetime mortgages?

Trying to compare lifetime mortgage rates between lenders can be tricky. There are a number of factors which determine what interest rate may apply such as age, personal health and the amount you’re looking to borrow.

With conventional mortgages, the interest rate can play a major part in the decision making process, whereas with lifetime mortgages the interest rate doesn’t really play such a key role and can be influenced by what type of lifetime mortgage suits your needs. The amount of rolled-up interest really depends on how long you live (which dictates the term) and how much you originally borrow.

Let’s look at some examples to illustrate this point:

Amount Borrowed Lifetime Mortgage Interest Rate Age at outset Age at death Term Interest Roll Up Total Amount Owed
£20,000 3.55% 58 94 36 £50,215 £70,215
£30,000 3.75% 63 83 20 £32,644 £62,644
£25,000 4.00% 72 88 16 £21,824 £46,824
£40,000 4.20% 79 85 6 £11,199 £51,199

The table above is purely for example purposes. To get a clear idea of the exact rates you will qualify for, make an enquiry to speak with an expert advisor

As you can see from the table above, the first example has the lowest interest rate and amount borrowed but also has the highest amount of accrued interest. The key determinant here was the life of the mortgage, which, for this example, was for 36 years.

The last example has both the highest interest rate and amount borrowed, however, the applicant only lived for 6 years, which resulted in the lowest accrued interest.

The difficulty is none of us know exactly how long we’re going to live, therefore, trying to work out how much interest we could eventually have to pay back from a lifetime mortgage is nigh on impossible.

However, if you look again at the first example in the table above, attaining the best interest rate available at the time has ensured the least amount of interest would be accrued, as illustrated here:

Amount Borrowed Lifetime Mortgage Interest Rate Age at outset Age at death Term Interest Roll Up Total Amount Owed
£20,000 3.55% 58 94 36 £50,215 £70,215
£20,000 3.75% 58 94 36 £55,266 £75,266
£20,000 4.00% 58 94 36 £62,078 £82,078
£20,000 4.20% 58 94 36 £67,956 £87,956

The table above is purely for example purposes. To get a clear idea of the exact rates you will qualify for, make an enquiry to speak with an expert advisor

As most interest rates for lifetime mortgages are fixed at the outset (so, it won’t ever really change), it is, therefore, in your best interests to look for the best rate you can find for the lifetime mortgage you need.

At the time of writing lifetime mortgage rates amongst lenders who are members of the Equity Release Council can typically range from 3.5% to 6%. However, these rates are subject to change, therefore, it’s vital you get in touch with us so we can ask an advisor we work with to speak to you and compare the best deals for lifetime mortgages currently available.

What factors could influence lifetime mortgage interest rates?

Rather than just looking at the interest rates available for lifetime mortgages you need to consider what features you wish to include that will provide the best lifetime mortgage for you as you reach retirement. All of these different features will influence the interest rate on offer.

Here are some things to consider:

  • How much are you looking to borrow?
  • Do you want a tax-free lump sum or drawdown income?
  • Do you want a lifetime mortgage that provides inheritance protection?
  • Would you like the option of making ad-hoc interest payments to your lifetime mortgage?
  • Are you considering downsizing once you reach retirement?
  • Do you prefer a fixed rate mortgage or a variable rate mortgage?

How much are you looking to borrow?

If you have a target amount in mind then it’s important that you find a lender who will be able to lend you this amount. Depending upon your age and personal health, most lenders will offer a loan to value of 55% and some will go as high as 60%.

Having a specific cash sum you wish to raise may restrict the number of lenders you can use and, therefore, may affect the interest rate you can secure.

Do you want a tax-free lump sum or drawdown income?

If you already have firm plans for what you would like to do with the equity then it makes sense to consider a lump sum lifetime mortgage where you receive all the money up front. If you’d rather use the money to top up your retirement income then an income drawdown lifetime mortgage would be more appropriate.

The benefit of an income drawdown option is that you only accrue interest on the amounts you have taken, which reduces the overall amount to be repaid at the end of the term. Different interest rates may apply depending on which type of lifetime mortgage you choose.

Do you want a lifetime mortgage that provides inheritance protection?

Some lenders offer a feature, which allows you to ring fence a specific amount of equity within your main residence that will pass to your beneficiaries when you die. If ‘inheritance protection’ is something that is important to you then this is the type of lifetime mortgage that would best suit your needs.

Can I make ad-hoc interest payments on my lifetime mortgage?

Flexible lifetime mortgages allow you to manage the amount of interest rolled-up by offering the option of voluntary regular interest payments during the term. If you have a secure source of retirement income then this may be something you wish to consider.

The long-term effect will be to reduce the final amount owed when you die or move into a care home. The interest rates available for flexible lifetime mortgages may differ from other types of lifetime mortgages, however, if this is a feature you feel suits your circumstances then you should pursue this option.

Are you considering downsizing once you reach retirement?

A few lenders offer a special feature known as ‘downsizing protection’ which allows you to move into a smaller house after five years, repay your outstanding lifetime mortgage and use the remaining equity to complete your new purchase.

This option allows you to clear all of your debt before you die or move into a care home, therefore, if you are considering downsizing at some stage when you retire this is something you may feel is more important than securing the best interest rate available.

Do you prefer a fixed rate lifetime mortgage or a variable rate lifetime mortgage?

Most lifetime mortgage providers offer a fixed-rate of interest, however, there are some who will offer a variable rate deal. Fixed-rates offer piece of mind and will remain the same for the duration of your lifetime mortgage.

A variable rate could, potentially, reduce the overall amount of interest accrued if the rate remains lower than a fixed rate over the same period, although there can be an inflationary risk with variable rate products.

As you can see, there are lots of different features to consider for lifetime mortgages and it’s important you choose the options that best suit your own circumstances. If you make an enquiry with us we can help you through this process and arrange for an expert to contact you directly.

Will my credit history affect my lifetime mortgage interest rate?

It generally won’t impact, although secured charges and IVAs usually need to be settled before the lender offers their approval.

How do I find the best lifetime mortgage for me?

The UK mortgage market is vast, and to find the best lifetime mortgage deals you qualify for, you’ll need to find a way to compare the rates on offer across the board - don’t worry, there’s a simple and painless way to do this...

How do I compare lifetime mortgages?

There’s no need to do all of the legwork yourself - the advisors we work with are whole-of-market and can compare the rates lenders are offering on lifetime mortgages and introduce you to the provider best equipped to offer a table-topping deal to a customer with your needs and circumstances.

This is a better alternative to using online rates table, which often give prominent placement to sponsored products and are not tailored to your profile as a borrower. It will also prevent you from ending up with unnecessary marks on your credit file as a result of having too many hard lender searches on there - you’ll be paired with the right provider first time, and offered bespoke advice every step of the way.

Make an enquiry here to kickstart your application.

Why you should speak to an expert lifetime mortgage broker

At Online Mortgage Advisor we can offer you a first-class service tailored to your own specific needs with access to the most experienced brokers available that can provide:

  • Holistic, whole of market, solutions
  • Excellent relationships with lifetime mortgage lenders and knowledge of who can provide the right products for each circumstance
  • OMA accredited advisors
  • LIBF accredited training course
  • Bespoke advice on lifetime mortgage products

Speak to a lifetime mortgage expert

If you have questions and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances.  – We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 15th April 2019
OnlineMortgageAdvisor 2019 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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