Equity Release Calculator
Calculate Your Equity Release Growth
Current Rate Reference
Typical APRs in 2025:
- Lifetime Mortgage: 4.3% - 4.7%
- Home Reversion: 3.8% effective
- Reverse Mortgage (AU): 5.1% - 5.4%
Important: Most equity release products use compound interest that grows over time. You don't make monthly payments, so the balance increases year after year.
Homeowners who want cash without moving often wonder about the equity release interest rate they’ll face today. This guide explains what equity release is, how rates are calculated, the latest numbers for 2025, and what you can do to lock in the best deal.
What is Equity Release?
When homeowners look to free up cash without moving, Equity Release a financial product that lets you borrow against the value of your home while staying in it is often considered. It’s designed for people over a certain age - typically 55+ in the UK and 60+ in Australia - who want to supplement retirement income, pay off debts, or fund home improvements.
Types of Equity Release
There are three main formats:
- Lifetime Mortgage a loan secured on your property that you repay when you die or move into long‑term care. The loan amount grows with interest, but you never make monthly repayments.
- Home Reversion you sell a percentage of your home to a provider in exchange for a lump sum while retaining the right to live there. You don’t owe interest, but you give up a share of future equity.
- Reverse Mortgage the Australian equivalent of a lifetime mortgage, regulated by the APRA, allowing seniors to receive regular payments or a lump sum. Like a UK lifetime mortgage, repayment is deferred until sale or death.
How Are Interest Rates Determined?
The Interest Rate the percentage charged on the borrowed amount for equity release products isn’t a fixed market rate like a standard mortgage. Providers add three key components:
- Base Rate Component: In the UK this tracks the Bank of England Base Rate the benchmark interest rate set by the UK central bank. In Australia it follows the Reserve Bank of Australia cash rate, but most Australian reverse mortgage providers quote an APR that includes a spread.
- Risk Premium: Because the loan is only repaid at the end of the term, lenders charge a higher premium to cover the longer exposure.
- Product‑Specific Fees: Arrangement fees, valuation costs, and legal charges are often built into the advertised APR.
These components create a wide range of advertised rates, which is why it’s essential to compare offers.
Current Average Rates in 2025
Below is a snapshot of the typical APRs quoted by the most popular UK and Australian providers as of October 2025. Rates are shown as Annual Percentage Rate (APR) - the true cost including fees.
| Provider | Product Type | Typical APR | Minimum Age | Max LTV |
|---|---|---|---|---|
| Provider A | Lifetime Mortgage | 4.3% | 55 | 55% |
| Provider B | Home Reversion | 3.8% (effective) | 55 | 30% (sale share) |
| Provider C | Reverse Mortgage (AU) | 5.1% | 60 | 50% |
| Provider D | Lifetime Mortgage | 4.7% | 55 | 60% |
| Provider E | Reverse Mortgage (AU) | 5.4% | 60 | 45% |
These figures are averages. Individual quotes can be lower or higher depending on your personal circumstances.
What Influences Your Personal Rate?
Even if the market APR sits at 4‑5%, the rate you receive may vary based on:
- Age: Older borrowers often qualify for a slightly lower premium because the loan term is shorter.
- Loan‑to‑Value (LTV): Borrowing a smaller percentage of your home’s value reduces risk and can shave 0.2‑0.5% off the APR.
- Credit History: While most equity release products are not credit‑score driven, providers may adjust rates for poor credit or high debt‑to‑income ratios.
- Property Type & Location: High‑value homes in prime locations often secure better rates because they’re easier to sell.
- Provider Competition: Some lenders run promotional rates for a limited period; watch the fine print.
How to Compare Offers and Secure the Best Rate
Follow this checklist before you sign:
- Get at least three written quotes. Even if you have a preferred provider, a second opinion can reveal hidden costs.
- Break down the APR. Ask for a schedule showing the base rate, risk premium, and all fees.
- Check the provider’s regulation status. In the UK, look for registration with the Financial Conduct Authority (FCA). In Australia, confirm licensing with the Australian Prudential Regulation Authority (APRA).
- Ask about early repayment penalties. Some deals lock you in for 5‑10 years before you can unwind without a hefty charge.
- Model the total repayment. Use an online equity release calculator (or ask the adviser) to see how the balance will grow over 10, 15, and 20 years.
- Consider the impact on inheritance. A higher APR means a larger debt at death, reducing what you can leave.
When you’ve weighted these factors, you’ll be in a better position to negotiate or choose the provider that offers the most favorable overall package.
Frequently Asked Questions
What is the difference between a lifetime mortgage and a home reversion?
A lifetime mortgage is a loan you never repay until you die or move into care; interest is added to the loan balance. A home reversion sells a share of your property outright, so you receive cash now but give up a portion of future equity.
Can I choose a fixed or variable interest rate for equity release?
Most UK lifetime mortgages offer a fixed rate for the life of the loan, which provides certainty. Some newer products let you opt for a variable rate linked to the base rate, but they’re less common.
How does the Bank of England base rate affect my equity release?
The base rate is the starting point for the lender’s calculation. If the BoE raises its rate, new equity release deals will usually carry a higher premium, though existing contracts stay locked at the rate when you signed.
Are there tax implications for receiving equity release funds?
In the UK, cash taken from an equity release plan is not considered income, so it does not affect Income Tax or state benefits (subject to means‑testing rules). In Australia, reverse mortgage proceeds are also tax‑free, but you should check how they interact with Centrelink payments.
What happens to the loan if I move abroad?
Most UK providers require you to sell the property if you permanently leave the UK. Some Australian reverse mortgage contracts allow you to keep the loan open for a limited period, but you’ll need to discuss the terms with your lender.
Next Steps
Now that you understand how the equity release interest rate is built and what the current market looks like, take action:
- Download a comparison sheet and fill in quotes from at least three FCA‑registered providers.
- Run the numbers on a free online calculator to see the projected balance at age 85 or 90.
- Book a no‑obligation meeting with a qualified equity release adviser - many charities offer this service for free.
Having the right data in hand will help you avoid surprises and lock in the most favourable rate for your situation.