"By positioning fixed lifetime mortgage rates as a long term risk management strategy rather than a short term cost consideration, advisers can continue to offer value-driven guidance"
The financial landscape in the UK is undergoing a shift, with the Bank of England base rate poised for a series of cuts throughout 2025. This movement has already triggered reductions in standard mortgage rates, further widening the gap between mainstream mortgage products and lifetime mortgages, which currently offer fixed-for-life interest rates in the 6-8% range. Given this divergence, financial advisers must be prepared to justify why recommending lifetime mortgages remains a sound strategy for appropriate clients, even amid falling base rates.
The long term value of fixed lifetime mortgage rates
While at first glance, the contrast between a declining base rate and relatively high fixed lifetime mortgage rates may seem stark, it is crucial to take a long term view. The appeal of a fixed-for-life rate lies in certainty. Unlike standard mortgages that fluctuate with the base rate (or require refinancing at potentially uncertain future rates), lifetime mortgages offer a known, predictable cost structure.
For retirees and older homeowners — those most likely to consider equity release — predictability can be more valuable than securing a lower rate that could later rise. Clients often seek stability in their later years, and the assurance of a fixed rate, irrespective of economic changes, can offer peace of mind and financial planning advantages.
The base rate may not stay low forever
While the base rate is expected to decline through 2025, advisers must consider the medium to long term economic outlook. A range of geopolitical and economic factors — global conflicts, supply chain disruptions, inflation volatility, and fiscal policies — suggest that the base rate could rise again in the coming years.
Relying on short term rate reductions to justify avoiding lifetime mortgages could expose clients to future interest rate hikes, making refinancing difficult or costly. A lifetime mortgage’s fixed rate shields homeowners from this risk, ensuring their borrowing costs remain unchanged regardless of future economic shifts.
Accessing equity without affordability constraints
Unlike traditional mortgages, lifetime mortgages do not require monthly repayments. Instead, interest rolls up over time and is repaid upon death or the homeowner’s move into long-term care. This makes them an attractive option for retirees who have equity in their homes but lack the income to pass affordability tests for standard remortgaging.
Advisors should highlight that, despite lower base rates, many older clients may not qualify for standard mortgage products. Equity release remains one of the few viable options for accessing home equity without the burden of regular repayments whilst retaining the flexibility to make ad-hoc repayments should there be spare disposable income and thus reduce the interest roll-up effect.
Market competition and product enhancements
As the lifetime mortgage market matures, lenders are innovating. Most providers now offer flexible repayment options, interest-servicing plans, and some even offer inheritance protection features, making lifetime mortgages more adaptable than ever whether the client uses it as a bridge to retirement, paying off an existing mortgage or helping children get on the property ladder themselves. While rates remain higher than standard mortgages, product flexibility can help clients manage costs and mitigate the effects of rolled-up interest.
The adviser’s role: educating clients beyond headline rates
Financial advisers have a duty to ensure clients understand the full picture. While a lower base rate can make traditional mortgages look more attractive in the short term, lifetime mortgages remain a critical tool for older homeowners who prioritise stability, access to equity, and flexibility over time.
By positioning fixed lifetime mortgage rates as a long term risk management strategy rather than a short term cost consideration, advisers can continue to offer value-driven guidance — even in a low base rate environment.
