Best Equity Release Interest Rates
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As you approach your retirement years your financial needs may change. You may require extra money for home improvements, or want to help your children or grandchildren out financially.
Whatever you need extra funds for, equity release is one of the ways you could boost your bank balance, if other options including using your savings, taking out a loan or downsizing your home are unsuitable.
Equity release involves accessing the cash tied up in your property to generate a lump sum or smaller regular payments into your bank. But as with taking out a loan, different interest rates apply with equity release, which is why careful research is needed if you do decide to go ahead with the process.
While we’d always recommend seeking independent financial advice to decide whether equity release is right for you, here is a further explanation of equity release along with the best interest rates available at the time of writing to guide you.
Equity Release: An Overview
Equity release involves taking the cash out of your home while you still live in it. The money is tax-free, and you can do whatever you like with it.
Common reasons for releasing equity include funding the likes of:
- Holidays
- Repaying an interest-only mortgage
- Buying a car
- Gifting
- Emergency fund
- Cost of living support
- Home improvements
- Enjoying life more
- Reducing debts
Some of these reasons may be to fulfil life-long ambitions, and others to afford unexpected expenses your savings or pension are unable to cover, such as needing a new boiler or a new car for example.
In addition, equity release can also help with the rising costs of living to supplement your existing pension.
Although not a substitute for independent financial advice, Martin Lewis also suggests seniors enjoy the money they have worked hard for through equity release – if the alternate option is to live a substandard quality of life throughout old age.
How Does Equity Release Work?
Equity release involves releasing funds tied up in your property. The money will be taken out of your estate when you die.
To access your equity, you will generally need to be aged 55 or over and be a homeowner of a freehold property.
You will then need to head to an equity release provider’s website. Most have equity release calculators available, where you will be given a tailored quote.
Some of the information that will be needed to obtain an equity release quote includes your:
- Date of birth
- Postcode
- Address
- Home value
- Amount of equity release required
- Your current health and lifestyle status
From there, we suggest making a note of the different quotes to find the most suitable interest rates combined with the product features that most appeal to you. Independent financial advice should be sought before making a final decision.
Once you select the right product for your needs and make your application, it can take around 8 weeks on average for the equity to be released to you.
Read more: Using The Equity In Your Home
Equity Release Types
Lifetime mortgages – A mortgage on the house which will be paid off when you die. You can choose to repay it month by month with some drawdown mortgage options, but generally, you will take the money and not have to think about the repayments.
A lifetime mortgage will reduce the value of your estate, so for those with dependents who do want to leave money behind, you’ll need to consider whether you are comfortable with this fact. Although, do remember that your equity is your money, and it’s important that you have a good standard of living while you are alive, rather than struggling needlessly just to provide a larger inheritance.
Home reversions – An equity release company will buy a fixed share of your property or the entire property. In return, you’ll receive a cash lump sum, a regular income or a combination of both.
However, because the company won’t get their money back until the property is sold (either when you die or move into long-term care), the amount offered to you will be far below the market value. Also, unlike with a lifetime mortgage, you will not retain full ownership of your home although you will be able to continue living in it, either rent-free or for a nominal charge.
Equity Release Interest Rates Guide
| Interest Rate | Rating |
| <2% | Outstanding |
| 3% | Excellent |
| 4% | Good |
| 5% | Average |
| 6% | Poor |
In recent times, interest rates have risen as a result of inflation. Sadly, this means that at present it is difficult to find MER interest rates below 4%, which represent most of the equity release market.
However, do keep your eyes peeled for providers who offer special incentives, such as for existing customers that have other products (i.e insurance). It may also be possible to secure a lower interest rate if opting for other equity release types.
Equity release acronyms to know:
- AER – Annual equivalent rate
- MER – Monthly equivalent rate
Comparing Equity Release Interest Rates UK
We recommend keeping an eye on equity release interest rates as they are subject to frequent fluctuations.
In the meantime, we’ve compiled the cheapest interest rates we can find from equity release providers in the UK.
Our list covers lifetime mortgage products only, arranged in order of the lowest to highest interest rates (MER).
Standard Life Equity Release
Product: Horizon 300
Rate: 4.27%
Minimum property valuation: £99,000
Maximum property valuation: £5,100,000
Minimum release: £10,000
Maximum release: £1,500,000
Upper age limit: 88
Incentives?: Free valuation, partial repayment option, no early repayment charge and a downsizing protection feature.
Verdict: Standard Life has recently re-entered the equity release market, having last offered the service back in 2008. Although, with a history stretching back to 1825, the company’s long presence offers plenty of reassurance for customers.
The Horizon 300 product offers the joint lowest interest rates at present. A notable feature is a generous scope in terms of minimum and maximum property valuations, as well as the capital release amounts. This lends the Horizon 300 to a wide spectrum of homeowners.
Those who only require a small amount of equity release, or those who have a lower property valuation (the national average property price currently stands at £248,000) don’t have to miss out with Standard Life, as may be the case with other plans that have higher thresholds.
Pure Retirement Equity Release
Product: Sovereign A
Rate: 4.27%
Minimum property valuation: £70,000
Maximum property valuation: N/A
Minimum release: £20,000
Maximum release: N/A
Upper age limit: 90
Incentives?: Free valuation, 3-year no early repayment charge, downsizing repayment exemption and fixed early repayment charges.
Verdict: The Sovereign A equity release plan from Pure Retirement offers identical interest rates to Standard Life Horizon 300 but has a slightly different product offering.
One advantage is that the minimum property valuation is £20,000 lower than Standard Life’s requirements at just £70,000. However, the minimum equity release is also double at £20,000 versus just £10,000 for Standard Life, meaning it’s perhaps geared towards more considered investments in your home or lifestyle.
That said, Pure Retirement has strived to create a brand that specifically caters for the retirement market of lifetime mortgages. They bring with them a wealth of knowledge, and their advisors are highly regarded, with 86% of customers giving Pure Retirement a 5-star rating on Trustpilot.
More2Life Equity Release
Product: Capital Choice Ultra Lite
Rate: 4.33%
Minimum property valuation: £100,000
Maximum property valuation: £5,000,000
Minimum release: £10,000
Maximum release: £1,500,000
Upper age limit: 95
Incentives?: Free valuation, no application fees, 10%PA partial repayments option, 3-year no early repayment charge, downsizing protection feature, guaranteed inheritance feature and fixed early repayment charges.
Verdict: On the whole, More2Life caters for the higher end of the property market. Their lending criteria has tough stipulations that may make the policy unsuitable for many homeowners. For instance, the property must be fully residential with no business use acceptable. The property must also not have any negative comments from the valuer, which may be difficult to achieve for homes which have not had any substantial improvement works in recent years.
Also, the initial press release for the Capital Choice Ultra Lite states that MER fees would be as low as 2.36%. However, just two years later, the website states the drawdown plan actually charges 4.33%. While this rate is still one of the lowest options available, the figure has almost doubled in two years due to inflation.
Canada Life Equity Release
Product: Lifestyle Select Ultra Lite Flexi
Rate: 4.37%
Minimum property valuation: £70,000
Maximum property valuation: £12,000,000 (bespoke options available for amounts greater than this)
Minimum release: £10,000
Maximum release: £1,000,000 (bespoke options available for amounts greater than this)
Upper age limit: 90
Incentives?: Free valuation, no negative equity guarantee, optional inheritance guarantee, early repayment waiver, downsizing protection, option to move home (subject to suitability) and a cash reserve facility.
Verdict: Despite the name, Canada Life equity release is available to UK residents. The company was founded in 1903 and also operates in Canada, America, Germany and Ireland.
Canada Life only sells its equity release products to those who have consulted a financial advisor, which is certainly reassuring. They also keep up to date with market activity, recently revealing the equity release market is now worth £800bn in the UK.
So does their heightened knowledge of the financial markets and equity release make them right for you? Well, with an upper property value limit of above £12,000,000, they certainly cater to the very upper end of the market, with most other providers capping their maximum limits around the £1,500,000 mark.
Canada Life only charges an early repayment fee for the first 8 years, with the interest rate reducing to just 3% after 5 years, which is excellent. There is a charge of around £1,000 for application and legal fees to be aware of, but this is small change for homeowners with sizable equity for which Canada Life is best geared towards.
LV Equity Release
Product: Drawdown+ Lite
Rate: 4.42%
Minimum property valuation: £100,000
Maximum property valuation: £5,000,000
Minimum release: £10,000
Maximum release: £1,500,000
Upper age limit: 95
Incentives?: Free valuation, free application, fixed early repayment charges, no early repayment charges for the first 3 years, 5-year downsizing protection and 10% voluntary payments with ERC.
Verdict: LV= (also known as Liverpool Victoria) offers some familiarity with the equity release scene, as a popular provider of insurance and equity release. Drawdown+ Lite is one of the many equity release options LV= provides, although offers the lowest interest rates.
The premise of the Drawdown+ Lite is that it’s ‘designed to let you borrow a little now, and more in the future’. Therefore, this product is best suited to those who aren’t looking for an immediate large cash lump sum.
Furthermore, LV= state the youngest homeowner must be 60, rather than the main or both homeowners being at least 55 like with other providers. So, it may not be suitable for younger homeowners who are in a rush to release their equity as soon as possible.
Legal & General Equity Release
Product: Premier Flexible Black
Rate: 4.56%
Minimum property valuation: £750,000
Maximum property valuation: Unlimited
Minimum release: £50,000
Maximum release: Unlimited
Upper age limit: 91 (upon completion)
Incentives?: Free valuation, free application, cashback, no negative equity guarantee, interest rate fixed for life of loan, early repayment charges are capped at 25% of the amounts drawn, inheritance protection and optional repayments.
Verdict: Legal & General was founded in 1836 making them one of the most recognised insurance and equity release providers in the UK.
The Premier Flexible Black does have significantly higher minimum property valuations and minimum release figures than most other equity release providers. However, they offer unlimited upper limits on property valuations and equity release amounts.
Legal & General will reduce MER interest rates by 0.4% if borrowing between £700,000 and £1,199,999. A reduction of 0.9% will be applied if borrowing an initial advance of an initial advance of £1,200,000 or more, which could make the Premier Flexible Black extremely attractive to those with both a higher level of equity and those wanting to release a significant amount of cash immediately.
Aviva Equity Release
Product: Lifestyle Flexible
Rate: 4.89%
Minimum property valuation: £75,000
Maximum property valuation: Unlimited
Minimum release: £10,000 (£15,000 for no drawdown option)
Maximum release: £1,000,000 (bespoke options available for amounts greater than this)
Upper age limit: Unlimited
Incentives?: Free valuation, inheritance protection guarantee, no negative equity guarantee, downsizing protection and voluntary partial repayments.
Verdict: Aviva is the only equity release provider on our list not to impose an upper limit on age or property valuation, arguably offering the greatest amount of freedom.
Aviva offers a voluntary partial repayment option, allowing you to make up to 10% repayments of the original amount borrowed without incurring a penalty. So for those who feel they can repay some of what they have borrowed and are concerned about leaving a reduced inheritance for any dependants, this option could strike the right balance. There are also no upper limits on the number of repayments they allow in any year, so long as the 10% total figure isn’t surpassed.
There’s also some flexibility for leasehold property owners, who are normally excluded from equity release products, so long as there are at least 160 years remaining on the lease. Though, the property must be your main residence meaning you spend at least 6 months of the year living there.
Equity Release FAQs
We’ve answered some of the most common questions about equity release below. Don’t see your query answered? Leave us a comment below and we’ll get back to you.
How Long Does Equity Release Take?
It usually takes around 8 weeks from the time of having your equity release being accepted to the money being released. Keep this in mind if you are approaching the upper age limit of the equity release provider you opt for, as this may invalidate your application.
What Is The Lowest Interest Rate On Equity Release?
Although equity release interest rates can be in the 2% range, recent hikes in interest rates mean the lowest rates now sit around the 4.3% mark. That said, your rate may differ depending on your circumstances, which is why thorough research is needed.
Is Equity Release A Good Idea?
This is a question that can only be answered on a case-by-case basis since no two people have the exact same circumstances. A financial advisor or equity release expert will be able to help you reach an informed decision.
How Much Equity Can I Release UK?
The amount of equity release you can release will depend on the provider you opt for. A handful of providers have unlimited amounts, though most cap their upper release limit at around £5,000,000.
Is There An Alternative To Equity Release?
Yes. One option is to downsize your home instead of releasing equity. An advantage of downsizing is that you can find a property that is easier to manage, such as a property that doesn’t have stairs if you have limited mobility.
Which Equity Release Companies To Avoid?
While we’re not here to name names, you should never choose an equity release company that isn’t fully regulated in the UK. Likewise, the provider should encourage you to seek independent advice and never rush your decision. Checking company reviews is also extremely important, as is finding out the right equity release type to suit your needs. Take your time to make your decision, as equity release can have serious financial implications if the wrong type or product is chosen.
Retirement Expert – Equity Release the UK
We hope you’ve enjoyed our article on the best equity release interest rates that are currently available in the UK.
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