Lifetime Mortgage rates and providers

 

Best Lifetime Mortgage Rates & Providers In The UK | February 2024

In the world of retirement finance in the UK, it is common to encounter the term “Lifetime Mortgage Rates”. This type of mortgage, available to homeowners aged 55 and above, is a long-term loan secured against the borrower’s property.

The loan, plus accumulated interest, is repaid when the homeowner dies or moves into long-term care. With the best mortgage deals often associated with lifetime mortgages, they provide a great option for retirement planning.

The key topics in this guide will help explain lifetime mortgages to you in a straightforward way. In this guide, you will find:

  • Some of the best lifetime mortgage rates 
  • A list of some of the best lifetime mortgage providers in the UK
  • The benefits and drawbacks of lifetime mortgages 
  • Eligibility criteria
  • Where you can get financial advice
  • Compare lifetime mortgages

Topics that you will find covered on this page

Understanding Lifetime Mortgage Rates

A lifetime mortgage plan is part of a range of equity release schemes.

These schemes provide homeowners with the option to access the wealth tied up in their property without leaving their home.

The money released is tax-free and can be used for any purpose which suits the homeowner, including supplementing retirement income and making home improvements.

Interest only lifetime mortgages offer a scheme where the homeowner pays off the interest costs regularly, preventing it from accumulating. For those who can afford to make regular interest payments and wish to minimise the total cost of the loan, this scheme can be particularly attractive.

The lifetime mortgage market in the UK is diverse with a range of deals available.

This diversity is reflected in the lifetime mortgage rates offered by different providers. Some offer fixed interest rates, allowing for certainty in regards to future interest roll up. Alternatively, others offer variable rate lifetime mortgages which can offer lower initial rates. However, future increases are a risk.

The rate you will be entitled to depends on a range of factors, including your age, the value of your property, and the amount you intend to borrow. The “loan to value” (LTV) ratio is commonly used in this context.

It refers to the size of the loan proportional to the value of the property. The higher the LTV, the higher the risk for the lifetime mortgage lender, which may result in higher equity release interest rates.

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Best Lifetime Mortgage Rates

Best Equity Release Interest Rates as of 24 February 2024

The table below shows you some of the best equity release rates, as of 24 February 2024, for lifetime mortgages from some of the leading equity release providers in the UK. 

Provider NameProduct NameInterest RateType of productOffers
Standard LifeHorizon 200 Drawdown5.26%FixedFree Valuation
Standard LifeHorizon 200 Drawdown Fee Free5.31%FixedFree Valuation
No application fee
More2LifeCapital Choice Ultra Lite Drawdown 15.46%FixedFree Valuation
No application fee
LV=Drawdown Lifestyle DD15.58%FixedFree Valuation
No application fee
Scottish WidowsFR15.60%FixedCashback
Free Valuation
No application fee
Standard LifeHorizon 280 Drawdown5.60%FixedFree Valuation
Legal & GeneralInterest Roll-Up 15.61%FixedFree Valuation
Legal & GeneralOptional Payment 15.61%FixedFree Valuation
LV=Drawdown Lifestyle DD25.63%FixedFree Valuation
No application fee
Legal & GeneralInterest Roll-Up 1 (no fee)5.65%FixedFree Valuation
No application fee

Call Boon Brokers on 0333 567 1607 to discuss your equity release requirements and see what deals are available to you.

These rates may have changed since this table was updated and should be taken as indicative only. There may be other providers not listed on this table that could offer better deals.  In addition, the providers and products noted may not be right for your particular circumstances.  The equity release rates have been sourced from the Equity Release Supermarket. These indicative rates and incentives may have changed since this article was last updated. Therefore, they should only be taken as a guide, and we cannot guarantee their current accuracy. Please also note that we do not provide advice on or endorse any particular product listed here. The rate you are offered will depend on your individual circumstances and subject to lender approval. Therefore, we strongly recommend that you speak to an equity release adviser, who will be able to provide you with information on the latest rates that apply to you.

Speak To An Equity Release Advisor Or Use the Equity Release Calculator Below To Estimate How Much You Can Borrow

The UK Care Guide works in partnership with Boon Brokers, one of the UKs leading equity release specialists.

You can contact them on 0333 567 1607 , or use the equity release calculator to estimate how much you can borrow.

Here is what Boon Brokers Offer

Whole of market access
Over a decade of experience
Great customer service

5 star client testimonials, on Trustpilot, about Boon Broker’s support and hands-on service

Call Boon Brokers on 0333 567 1607 to discuss your equity release requirements.

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use the equity release calculator to see how much money you could release from your property. Takes less than 60 seconds!

All equity release and mortgage advice is provided by Boon Brokers Limited, which is authorised and regulated by the Financial Conduct Authority (FCA). The Financial Services Register number is 973757. 

If you take out a product with Boon Brokers, we will receive a fee for introducing you to them. Boon Brokers provides advice for free and without obligation.  By contacting Boon Brokers through us, the cost of any equity release product would be the same as if you had contacted them directly.  

The fee we receive is used to help keep this site operational and to produce new content.  

Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage.

Determining Your Lifetime Mortgage Rate

Determining your lifetime mortgage rate involves taking into account several factors, including your age and your LTV. The best mortgage rates are more likely to be offered to those with a lower LTV and a younger age.

However, even within these parameters, rates can vary significantly between providers, making it necessary to compare offers.

One of the key determinants on your lifetime mortgage rate is your age. The older you are, the higher the risk to the lender. Consequently, this may result in higher interest rates.

However, some providers specifically offer lifetime mortgages for pensioners, which may offer more competitive rates for older borrowers.

The value of your property is also important in determining your rate.

A higher property value can result in a lower LTV. This potentially leads to a lower interest rate, and visa-versa. If your property value is lower, you may face a higher LTV and consequently, a higher interest rate.

Your health and lifestyle can also influence your rate. Some lenders offer enhanced lifetime mortgage rates for those with certain health conditions or lifestyle factors. As these can shorten one’s life expectancy, this reduces the expected term of the loan and therefore the risk to the lender.

Factors Affecting Lifetime Mortgage Rates

As outlined in the previous section, the most significant factors influencing rates include the borrower’s age, property value, and the amount they wish to borrow.

Other factors, such as the borrower’s health and lifestyle and the type of property, are also important considerations. 

Another influence on lifetime mortgage rates is the prevailing economic conditions.

If interest rates are generally lower than the average interest rate, this can result in lower lifetime mortgage rates. Conversely, if interest rates are high, this can result in higher rates.

Benefits of Lower Lifetime Mortgage Rates

Opting for lower lifetime mortgage rates has several benefits. Firstly, a lower rate means less interest will accumulate over the lifecourse of the loan, reducing the total amount that will need to be repaid in the long term. This can work to assist with monthly budgeting.

Furthermore, a lower rate increases the total equity release loan you can borrow.

This is because the lender will consider the total cost of the loan, including the interest calculated, when deciding how much they are willing to lend.

Finally, a lower rate provides peace of mind, as knowing that your debt is growing at a slower rate can reduce financial worry in the long term.

Drawbacks of High Lifetime Mortgage Rates

It is important to note that higher lifetime mortgage rates have several drawbacks. The most significant of these is the faster accumulation of interest.

This can significantly increase the total amount that will need to be repaid, particularly if the loan remains in place for many years.

If you opt for an interest-only mortgage, high lifetime mortgage rates can also result in larger monthly repayments. This makes the loan less affordable and may put pressure on your monthly budget.

Higher rates can also limit the total amount you can borrow.

This is because the lender considers the total cost of the loan (including the interest) when deciding how much they are willing to lend.

In most instances, high lifetime mortgage rates can lead to increased financial stress, worry and uncertainty. This is due to your loan amount growing at a fast and potentially unpredictable rate. 

Some of the best lifetime mortgage providers

Here is a list of some providers that offer Lifetime mortgages in the UK.

  • Aviva Equity Release
  • Just Group
  • Key Retirement
  • Legal & General Home Finance
  • LV= Equity Release
  • More2Life
  • Retirement Advantage
  • Responsible Life
  • Pure Retirement

These are some of the leading equity release providers in the UK, but there are others too. This is not an exhaustive list.

It’s important to research and compare different providers and products, and to seek advice from a qualified professional before making a decision. 

Equity release can be a complex and important decision, and it’s important to understand the risks and benefits associated with different providers and products.

What are the advantages of a lifetime mortgage?

1 – Retaining ownership of your property

If you wish to keep your property in the family, this option allows you to do so. This might be the case if you or your family plan to live in your home indefinitely. You can also sell your home early should your circumstances change.  

2 – Freedom to use your money

The money borrowed can be spent (or reinvested) however you choose, giving you freedom and flexibility. 

3 – Negative equity guarantee

Many lifetime mortgage providers offer a ‘negative equity guarantee’, ensuring that you won’t have to pay back more than you received when you eventually come to sell your property.

4 – Inheritance planning

Some lenders also allow you to portion and protect a percentage of the property’s value to gift as inheritance, or make partial repayments early should your circumstances change. This means you can ensure your family receives some inheritance from your home.

5 – Partial repayments

Some lifetime mortgages will allow you to repay some of your debt early. This will increase the amount that may be available to your family when you pass on.

What are the disadvantages of a lifetime mortgage?

1 – Reduces your inheritance

Equity release schemes and lifetime mortgages, in particular, will likely reduce the amount of inheritance you can gift to family members and friends. 

However, this is less of a concern if the overall cost of imminent care needs is likely to reduce the amount you can leave when you pass away. We recommend seeking independent advice so that you make the best decision based on your circumstances.

2 – Impact on benefits and tax position

A lifetime mortgage can affect your entitlement to certain state benefit payments and your tax position – so it’s worth obtaining a clear picture of how enrolling on a scheme could affect your income support before making a decision.

3 – Accruing interest

Lifetime mortgages accrue interest on the mortgage itself and the interest added each year.

This significantly increases the amount you’ll have to repay later down the line. (Interest only lifetime mortgages can be taken out to alleviate this – as detailed below).

4 – Repayment

You may need permission or be forced to make repayment early should you decide to rent out your property or sell it before the agreed time has elapsed.

Therefore, if you do change your mind, or find that your circumstances change, things  can become rather complicated. 

Comparing Lifetime Mortgage Rates in the UK

When looking for the best mortgage deals, it is important to compare rates from different UK-based lenders.

Rates vary significantly between providers, so shopping around can help you to find the best deal for you.

One way to do this is through a lifetime mortgage calculator. These online tools give you an estimate of the rates which you might be offered based on the lending criteria. As mentioned previously, this factors in your age, property value, and the amount you wish to borrow.

However, it is important to remember that these are only estimates.

It’s also worthwhile to consider the different types of lifetime mortgages available. For example, some providers specialise in offering retirement mortgages. These can offer more competitive rates for older borrowers.

Additionally, some providers offer different types of lifetime mortgages, such as interest only lifetime mortgages or variable rate lifetime mortgages.

As these offer different rates, it is important to be aware of the costs and benefits of each before making a decision.

It is also key to note that although lifetime mortgages can seem attractive for accessing property wealth, they also carry a multitude of risks. For instance, interest accumulation can quickly erode remaining equity over time.

This is why seeking personalised advice from a qualified financial advisor can help you to evaluate whether lifetime mortgages are suited to your individual circumstances.

It is crucial to never take out this type of product without fully understanding the long-term implications.

How is the interest rate on a lifetime mortgage determined, and how is interest calculated?

The interest rate on a lifetime mortgage depends on variables such as the initial loan amount, your personal situation, and market conditions. Lifetime mortgage interest rates can be fixed or variable.

Interest on a lifetime mortgage is typically computed using compound interest, with either an annual equivalent rate (AER) or a monthly equivalent rate (MER). Utilise a free equity release calculator to determine the amount of equity released and the average interest rate that will accrue over time.

How to Secure the Best Lifetime Mortgage Rates

Securing the best lifetime mortgage rates involves researching the market, comparing rates from different providers, and using a lifetime mortgage calculator to get an indication of the amount you may be offered.

Moreover, consider working with an independent financial advisor or an equity release specialist to get tailored advice and extra help with navigating the market.

They can also negotiate rates on your behalf.

Thirdly, take steps to improve your financial profile, including reducing any outstanding debt, maintaining a healthy lifestyle, or making improvements to your property to increase its value.

best lifetime mortgage

Lifetime Mortgage Rates and Equity Release

Lifetime mortgage rates play an integral role in the equity release process.

The rate which you’re offered will determine how much the loan will cost, as well as how much equity will remain in your property after the loan is repaid.

There are several types of equity release schemes on the market, including lifetime mortgages and home reversion plans. Lifetime mortgages are the most sought after, largely due to the flexibility which they offer.

With a lifetime mortgage, you can choose to make no monthly repayments, make interest-only repayments, or make full repayments, according to your financial circumstances and personal preferences.

The rate you’re offered can significantly impact the overall cost of the loan.

Whilst a lower rate will result in less interest accumulating and a lower total cost, a higher rate will result in more interest accumulating and a higher total cost.

Lifetime Mortgage Rates vs Fixed Rates

When considering lifetime mortgage rates, it’s important to compare them to fixed rates. Lifetime mortgage rates can vary over the lifecourse of the loan, whereas fixed rates remain consistent. This provides certainty about future repayments, making budgeting simpler.

However, fixed rates can be higher than variable rates initially, as the lender is taking on the risk of future interest rate increases.

Whether a fixed rate or a variable rate is better for you will depend on your financial circumstances and the risks you are willing to take.

If you value certainty and are comfortable with potentially higher initial rates, a fixed rate might be the best option. Alternatively, if you’re willing to take on some risk for potentially lower initial rates, a variable rate may suit you.

Changes in Lifetime Mortgage Rates Over Time

Due to a range of factors, lifetime mortgage rates can change over time. These include changes in the Bank of England base rate, the lender’s cost of borrowing and the broader economic conditions.

If you choose a variable rate lifetime mortgage, your rate will go up or down over the life of the loan, impacting the total cost of your loan and your monthly repayments if you choose to make them.

On the other hand, choosing a fixed rate means that your rate will stay the same for a set period of time, regardless of changes in the wider economic market.

However, after this period, your rate may revert to the standard variable rate of the lifetime mortgage provider. This has the potential to be higher.

Keeping an eye on changes in lifetime mortgage rates will help you to make informed decisions about your loan.

Before making these decisions, it is also important to seek advice from a financial adviser or an equity release adviser.

Here is also a helpful video from Martin Lewis where he discusses equity release.

What happens if I owe more than my home is worth?

If the calculation from the mortgage provider shows that you owe more than your home is worth when it’s sold on the open market, the mortgage provider isn’t able to try and get any more money from your estate.  This is where the ‘no-negative equity guarantee’ kicks in.

In this circumstance, when the property is sold, the entire proceeds of the sale will be paid across to the mortgage lender.   Clearly, this also means that you will have nothing left to pass on to your family.

If you’re worried about the interest on Equity Release Mortgages and want to guarantee that you have something to pass on to your family, you always have the option to not ‘roll-up’ the interest.

This means that you can look to structure your loan like an interest-only mortgage, and opt to make interest payments throughout the life of the loan. 

This allows you to keep the outstanding balance fixed rather than seeing it escalate with the interest amount rolled up.

Comparing Lifetime Mortgages

When considering lifetime mortgages, it is important to compare rates from different providers.

The best lifetime mortgages will offer competitive interest rates, flexible repayment options and have a negative equity guarantee.

It is crucial to remember that interest rates can vary significantly between providers. Therefore, it is vital to compare interest rates and take into account whether these are fixed or variable rates. 

When comparing lifetime mortgage products, look for lenders that follow Equity Release Council standards.

This is because member organisations agree to fair terms and conditions, clear product information, and necessary safeguards for consumers. Consequently, the Council’s product standards offer an additional layer of protection. 

One well-known provider in the UK is Aviva. The Aviva lifetime mortgage offers competitive rates, flexible repayment options and a fixed interest rate. This provides certainty about the future cost of the loan.

Another factor to consider when comparing lifetime mortgages is whether the provider offers enhanced lifetime mortgages.

These are mortgages offering higher loan amounts or lower interest rates for those with certain health conditions or lifestyle factors.

Best Lifetime Mortgage Deals

Finding the best lifetime mortgage deal involves more than just looking at interest rates. Rather, the best mortgages offer flexible repayment options. This includes the ability to make monthly interest payments, which can help to reduce the total cost of the loan. Alternatively, some products allow you to make partial repayments of the loan amount, helping to manage the overall long term debt.

Membership of the Equity Release Council is another important factor. This industry body sets high standards for its members to ensure that consumers are treated fairly and within their best interests.

All products offered by equity release partner companies come with the negative equity guarantee, meaning that you will never owe more than the value of your home.

Another factor to consider when looking for the best lifetime mortgage deals is the annual equivalent rate (AER). This is a measure of the cost of the loan, including both the interest rate and any fees. This will support you in comparing the cost of different products more easily.

Furthermore, the Financial Conduct Authority offers helpful guidance on warning signs of potential lifetime mortgage scams or misleading deals. Key details to watch out for include:

  • Claiming that the equity released is “tax-free cash”
  • Pressuring you to make a very quick decision
  • Lacking proper documentation about the loan’s terms
  • Offering vague claims about government backing for the product

Before committing to a lifetime mortgage, it is important to always take your time to research providers thoroughly.

Using a Free Equity Release Calculator

When considering a lifetime mortgage, using a free equity release calculator can be a useful first step. These online tools provide an estimate of how much you could borrow and of the lifetime mortgage interest rates you may be offered.

However, it’s important to remember that the actual rate you’re offered may be different and will depend on a detailed assessment of your circumstances by the lender.

The calculator can also show the loan balance trajectory over time, depending on whether you choose to make monthly interest payments or allow the interest to roll up. This can help you to understand the long-term implications of taking out a lifetime mortgage.

FAQ

1. What are the Interest Rates for Lifetime Mortgages in the UK?

Interest rates for lifetime mortgages in the UK vary between providers and are influenced by several factors, including the borrower’s age, health, property value and the loan to value ratio (LTV). Most lifetime mortgages provide an option of fixed or variable interest rates. The annual percentage rate (APR) is a useful way to compare rates from different providers, as it includes both the interest rate and any additional fees.

As there is greater risk to the lender, interest only lifetime mortgage rates are typically higher than those for traditional mortgages. However, these products offer the benefit of a lower monthly equivalent rate, since you are only required to pay the interest per month. When the property is sold, the accrued interest on the initial loan amount is then repaid.

2. How Early Can I Repay a Lifetime Mortgage and What are the Penalties?

Lifetime mortgages are intended to last for the rest of your life, or until you move into long-term care. However, most lifetime mortgage providers offer the flexibility to repay the loan early, depending on whether your circumstances change. However, early repayment charges will apply, making it important to understand these before taking out a loan.

The terms and conditions of early repayment charges will vary between lenders. Whilst some charge a fixed fee, others calculate the charge as a percentage of the loan. In some cases, the charge may decrease over time. 

3. Can I Release Equity from an Existing Mortgage?

Yes, you can release equity from a property with an existing mortgage. This is often done by taking out a lifetime mortgage and using it to repay the existing mortgage. Any remaining funds are then paid to you as a lump sum or as regular monthly payments.

However, there are some crucial considerations when releasing equity from a property with an existing mortgage. The interest rate on the lifetime mortgage may be higher than your current mortgage rate, and, if you choose an interest roll up scheme, the total amount owed can quickly increase. This is due to the effects of compound interest.

4. What is a Flexible Lifetime Mortgage?

A flexible lifetime mortgage is a type of lifetime mortgage that offers more flexibility in how you repay the interest and loan. With this type of mortgage, you have the option to make regular monthly payments. Consequently, this reduces the amount of interest built up. Some products even allow you to repay a small amount of the loan, helping to reduce the total amount of debt.

However, flexible lifetime mortgages may have higher interest rates than other types of lifetime mortgages. Consequently, it is important to weigh up the costs and benefits and seek independent financial advice before deciding if this option is best for you.

5. How much Interest will I owe on a Lifetime Mortgage?

The amount of interest you will owe depends on several factors, including the interest rate, the amount you borrow, and the length of time the loan is in place. If you choose a product where the interest is rolled up, the interest is added to the loan and compound interest is applied. This means that you pay interest on the initial loan amount, and any interest that has already been applied.

An equity release advisor can help you to understand how much interest you may be charged on a lifetime mortgage. They can also explain how making regular interest payments, or partial capital repayments can help to reduce the overall amount of interest owed.

use the equity release calculator to see how much money you could release from your property. Takes less than 60 seconds!

Financial Promotions Sign-off

Where applicable, the adverts for Boon Brokers on this page have been signed off as a Financial Promotion by Boon Brokers Limited, to ensure that they are in compliance with Section 21 of FSMA. Boon Brokers Limited is authorised and regulated by the Financial Conduct Authority (FCA). The Financial Services Register number is 973757. The Age Partnership equity release calculator has been approved and provided by Age Partnership. Age Partnership is a trading name of Age Partnership Limited, which is authorised and regulated by the Financial Conduct Authority. FCA registered number 425432.

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Call : 0333 567 1607

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All equity release advice is provided by Boon Brokers Limited, which is authorised and regulated by the Financial Conduct Authority (FCA). The Financial Services Register number is 973757. 

 

If you take out a product with Boon Brokers, we will receive a fee for introducing you to them. Boon Brokers provides advice for free and without obligation.  By contacting Boon Brokers through us, the cost of any equity release product would be the same as if you had contacted them directly.  

The fee we receive is used to help keep this site operational and to produce new content.  

 

Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage.

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