Equity release in 2025/6: Here’s what you need to know

The following information is correct as of 09.12.2025.

If you’re a homeowner over 55, equity release could help you unlock the value in your home and give you more control over your finances in later life. However, you may want to gain a better understanding of the costs you could incur before you speak with an adviser and move forward with an application if it is the right solution for you. In this article, we break down the main costs of equity release in 2025/6, including interest rates, fees, and the latest changes, explaining what they could mean for you.

Interest rates: What changed in 2025?

The most common form of equity release is a Lifetime Mortgage. To understand how the features and risks apply to you, meet with an adviser and request a personalised illustration.

In line with the standards set out by the Equity Release Council, interest rates on Lifetime Mortgages are fixed for life, or if variable, have a fixed cap. This means you don’t need to worry about your original interest rate increasing unexpectedly. However, interest compounds over time, meaning interest accrues on both the original loan and any previously added interest. This can significantly increase the total amount owed, especially over longer periods.

If you choose a drawdown product, interest rates will be calculated each time you choose to access your equity. This means that the interest rates from your initial lump sum and any subsequent releases might be different, depending on the market rate at the time.

When you choose a lender who is a member of the Equity Release Council, you’ll benefit from a no-negative equity guarantee, ensuring you never owe more than the value of your home. However, releasing equity will reduce the value of your estate and may affect your entitlement to means-tested benefits.

Fees and other costs

The total cost of your equity release depends on how much you release, your interest rate, and other potential fees. Fees may differ depending on your circumstances, the lender and the product you choose. Here’s what you might expect:

• Advice fees: You’ll need to work with a qualified equity release adviser, who will guide you through the process and help you decide if equity release is right for you. They might choose to charge a fee, but that will depend on who you choose to work with.
• Valuation Fees: Lenders might require a valuation of your property to determine how much equity you can release.
• Solicitor fees: Legal advice is essential to ensure you understand the terms and implications.
• Surveyor fees and application fees: Your lender might charge these, depending on their requirements.
• Early repayment charges (ERCs): Depending on what product you choose, you could incur ERCs if you decide you want to repay more than your loan permits within a particular time period.

Repaying interest and early repayment charges

With Lifetime Mortgages, you have the option to make voluntary payments towards the interest, which helps to reduce the total amount owed. However, if you wish to pay back more than the lender’s limit, you might incur early repayment charges. Some products may offer more flexibility, such as reduced early repayment charge periods or drawdown facilities, allowing you to access your property wealth in stages when you need it.

Autumn Budget: What does it mean for over-55s?

The much-anticipated Autumn budget was announced on 26 November 2025, and here are some of the key updates that could affect people over 55:

Inheritance tax thresholds

The threshold for inheritance tax will remain at £325,000 until April 2031. As this won’t rise in line with inflation, more families could potentially be drawn into paying tax when they might not have planned to.

Pensions

Income tax thresholds have also been frozen, but the state pension has increased. 12 million pensioners could gain up to £575 in 2026-27, meaning that the full new state pension could rise to over £12,000. This is getting closer to the minimum annual income to pay tax. These changes are important to consider when planning for your future.

ISA rules

The maximum annual ISA contribution has changed. From April 2027, you will only be able to save £12,000 annually in cash ISAs, within an overall ISA limit of £20,000 annually. However, people over 65 can still save up to £20,000 in cash ISAs annually. If you are planning on using ISAs to save for your retirement, it is important to factor in these changes.

Equity release could become a valuable option for managing your finances in later life. These changes from the Autumn budget show how important it is for there to be flexible, well-designed financial solutions in retirement.

What do you need to consider?

• Your circumstances are unique: Equity release is not a one-size-fits-all solution. Individual advice from a qualified adviser is essential.
• Alternatives: Downsizing, remortgaging, or using savings may be more suitable for some homeowners. 
• Impact on inheritance: Releasing equity reduces the value of your estate, affecting the amount you leave behind for loved ones.
• Effect on benefits: Receiving a lump sum could affect means-tested benefits.

Thinking about equity release?

You must speak to a qualified adviser to understand your options and the costs involved. This article offers insight into the bigger picture of equity release, and exact costs will depend on your situation.

“Royal London Equity Release” is a trading name of Responsible Lending Limited. Responsible Lending Limited uses Royal London branding under licence from Royal London Marketing Limited. “Royal London”, the “Royal London logo” and “Royal London Equity Release” are registered trademarks of The Royal London Mutual Insurance Society Limited. Responsible Lending Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register under reference 763158. Registered in England and Wales under company number 09801855. Registered office: Princess Court, 23 Princess Street, Plymouth PL1 2EX. Responsible Lending Limited is a wholly owned subsidiary of the Royal London Group. Being a wholly owned subsidiary of the Royal London Group does not alter Responsible Lending Limited’s regulatory responsibilities.