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Comparing Lifetime Mortgage Deals

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

No impact on credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 18, 2021

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

However, interest rates aren’t as significant for lifetime mortgages as they are with traditional mortgages, as we’ll explain in this article.

If you prefer to skip the reading and get answers to your questions quickly and easily, speak directly to someone who can help you find the right mortgage solution.

Call 0808 189 2301 or make a quick online enquiry and we’ll match you with an advisor experienced in helping customers in similar situations to yours.

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

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 things 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 play such a key role and can be influenced by what type of lifetime mortgage suits your needs.

The amount of rolled-up interest depends on how long you live (which dictates the term) and how much you originally borrowed.

Let’s look at some examples to illustrate:

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 that none of us know exactly how long we’re going to live, so trying to work out how much interest we might eventually have to pay back from a lifetime mortgage is practically 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 shouldn’t ever change), it makes sense to find the best rate available for the lifetime mortgage you need.

At the time of writing, lifetime mortgage rates amongst lenders can typically range from 3.5% to 6% but as these rates are subject to change, it’s always a good idea to seek expert advice.

Get in touch or call 0808 189 2301 to speak with one of the advisors we work with. We’ll match you with an advisor who is experienced in successfully arranging lifetime mortgages for people in similar circumstances.

They will be happy to answer all your questions and compare the best deals for lifetime mortgages currently available. They’ll work with you to ensure you understand the decision and ensure you get the best available rate on the right lifetime mortgage.

The service we offer is free and there’s absolutely no obligation.

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What factors could influence lifetime mortgage interest rates?

Rather than just looking at the interest rates available for lifetime mortgages you also need to consider what features you wish to include, to ensure you’re getting the best lifetime mortgage for your circumstances.

The different features on offer will influence the interest rate on the lifetime mortgage agreement.

Here are some things to consider:

  • How much do you want to borrow?
  • Do you want a tax-free lump sum or drawdown income?
  • Do you want a lifetime mortgage which also 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 set amount in mind you’ll need to find a lender who will be able to lend you this sum. Depending upon your age and 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’d 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 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.

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’re 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.

We’ll match you with one of the expert advisors we work with. They’ll be able to answer any questions you might have and help you understand the options available to you.

Once you’ve reached a decision about the sort of lifetime mortgage which will suit you, they’ll be able to find you the best available product to meet your needs, help with the application process and ensure you receive a smooth transition from application to completion.

Will my credit history affect my lifetime mortgage interest rate?

Generally, a poor credit history won’t impact your ability to get a lifetime mortgage, 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?

You could start looking at online rates table, but take them with a good pinch of salt as they often give prominent placement to sponsored products and can’t take your specific circumstances into account.

However, there’s no need to do all of the legwork yourself. The advisors we work with are all whole-of-market and can compare the rates lenders are offering on lifetime mortgages for you.

They’ll work with you to understand your needs and circumstances and then introduce you to the provider best equipped to offer the best available deal.

This way you’ll also make sure you don’t end up with unnecessary marks on your credit file since the advisor you work with will pair you with the right provider first time, and you’ll get bespoke advice every step of the way.

Why you should speak to an expert lifetime mortgage broker

As explained above, we provide 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

Call 0808 189 2301 or make an online enquiry.

Then sit back and let us match you with a 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.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the 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 information 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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