By Tom Philips at January 14, 2025

Will Equity Release Rates Increase or Decrease in 2025

Lots of people think that equity release interest rates are solely determined by the Bank of England’s base interest rate.

Whilst the Bank of England’s base interest rate does have a heavy influence on equity release interest rates, there are also a number of other factors that will determine how high or low your interest rate is.

It is firstly important to understand that with all equity release interest rates, your rates will be fixed for the duration of your equity release loan, which should last until you pass away or move into a care home.

Once this happens, your home and property should be sold and the proceeds from the sale of the house will pay off the equity release loan in full [1].

When it comes to how high or low your interest rate is, there are a number of determining factors. Some of these you can and cannot control.

For example, how old you are will have a large influence on not only how much you can borrow, but what your interest rate will be.

For example, the older you are, the more you should be able to borrow. This will have an impact on your interest rate.

For anyone aged 65 or under, you should be able to borrow approximately 30% of the value of your home.

However, for anyone aged 70 or over, you should be able to borrow more like 45%.

Likewise, different lenders offer different interest rates depending on your personal circumstances.

Whilst one lender might offer you a lower interest rate, it’s important to look into their product offering and their terms and conditions.

Equity release interest rates are determined by the financial market and will typically be offered based on the Bank of England’s base rate as well as GILTs.

GILTs are UK Government bonds which fluctuate every day.

Typically, if interest rates go up, then GILT rates usually fall. Likewise, if interest rates go down, GILT rates will go up [1].

Please call our 24-Hour Helpline for the Best Equity Release Companies & Interest Rates: 0330 058 1579

What happened to interest rates in 2024?

Equity release interest rates have remained steady throughout 2024.

In fact, they have dropped ever so slightly by 0.5%, from 7.5% to 7% within 12 months, according to the Equity Release Council [2].

Whilst it’s difficult to predict what will happen in the future, the market is showing great signs, with the lowest current interest rate offered to equity release lenders sitting at approximately 5.9%.

If rates were to drop even further, then the market should see an influx of borrowers. Remember, equity release interest rates are fixed for the duration of your loan.

So, once you lock in, you will remain paying the same amount of interest until you pass away or move into a care home.

This interest will compound over the years, which means that the amount you will owe back will snowball.

Please call our 24-Hour Helpline for the Best Equity Release Companies & Interest Rates: 0330 058 1579

What are the differences between fixed and variable rates?

If you are considering taking out an equity release loan, then you need to understand the differences between fixed and variable interest rates.

With fixed interest rates, your rate will stay the same for the duration of your loan, although your interest will turn into compound interest as the years go on [3].

Some lenders also offer variable interest rates. This means that the amount of interest you will pay on your equity release loan will fluctuate depending on what’s happening in the financial market.

However, there is usually an agreed cap on the amount of interest you will be charged [3].

If you have agreed to a variable interest rate, then you might be able to switch plans or lenders in order to get a lower interest rate after a few years.

With lifetime mortgages, you might be able to switch lenders or simply just switch plans with the same lender.

Each lender will have different rules when it comes to switching plans in search of a cheaper interest rate.

Please call our 24-Hour Helpline for the Best Equity Release Companies & Interest Rates: 0330 058 1579

Will the Bank of England’s base rate go down in 2025?

The Bank of England’s base rate has fluctuated massively over the past couple of years.

In fact, it sat at an all-time low in 2021, after the impact of Covid-19, where it sat at just 0.1%.

It then rose to a 16-year high of 5.25% in 2023, causing havoc with borrowing rates and the housing market.

This was particularly hard on borrowers, who’s fixed terms ended, skyrocketing their payments.

The Bank of England’s base rate was cut in the second half of 2024, which will hopefully continue throughout 2025.

Nevertheless, this will largely depend on inflation rates, which have started to rise in recent months, towards the end of 2024.

There are a number of factors which influence the Bank of England’s base rate, and as the world’s geopolitical issues escalate, it becomes increasingly hard to predict what might happen in 2025.

It is important to understand that fixed interest rates don’t always follow the Bank of England’s base rate.

This base rate is only put in place as a guide for lenders to follow and could take some time to come into effect.

Please call our 24-Hour Helpline for the Best Equity Release Companies & Interest Rates: 0330 058 1579

Will equity release interest rates go down in 2025?

As explained above, whilst the Bank of England’s base rate might go down in 2025, that does not necessarily mean that interest rates will follow suit straight away.

Whilst some experts argue that interest rates might go down towards the end of 2025, others argue that it won’t be a linear drop, meaning that interest rates might go up again before they go down.

Some experts are suggesting that interest rates will drop twice in 2025 but are unsure as to how much, whereas others are suggesting that they might stabilise.

As you can see, it is incredibly difficult to predict what might happen in 2025, which is why it’s important to speak to a qualified mortgage or equity release adviser before locking in.

Remember, if you opt for an equity release loan then you will be opting for a fixed interest rate.

This means that it will stay the same for the duration of your loan, although the interest will compound year on year, month on month.

This means that your overall loan amount will snowball and will need to be repaid once you pass away or move into a care home.

Please call our 24-Hour Helpline for the Best Equity Release Companies & Interest Rates: 0330 058 1579

Speak to Equity Release Warehouse

If you are considering taking out an equity release loan but are nervous about whether interest rates will increase or decrease in 2025, then make sure that you speak to a qualified equity release adviser.

They will be able to search the market for the very best interest rates for you and your personal circumstances.

Our team of specialist advisers will never put any pressure on you to take out an equity release loan or opt for a certain interest rate.

Our team will only ever provide you with the information you need to make an informed decision.

In order to speak to one of our specialists, call a member of our team today on 0330 058 1579 or by visiting us by searching for www.equityreleasewarehouse.com.