Mortgage rate rises present a challenge for older homeowners

Mortgage rates have started to rise again, creating a potential headache for older homeowners coming to the end of a fixed-rate deal.

Rates have been noticeably volatile in 2026, with events in the Middle East contributing to sharp movements in the cost of borrowing.

According to Moneyfacts, the average mortgage rate rose from 5.47% in July to 5.59% at the start of August. Renewed conflict in the Middle East has increased concerns about inflation and pushed up lenders’ funding costs.

Rates had been moving lower after an earlier surge in March, when US strikes on Iran contributed to mortgage rates rising by around 1% in a single month. However, renewed tensions have since put upward pressure on rates again.

Why could this be a problem for older homeowners?

For homeowners coming to the end of a fixed-rate deal, higher rates could mean a significant increase in their monthly mortgage payments when they remortgage.

This could be particularly challenging if you’re semi-retired or retired. Your income may be lower or more limited than it was while you were working, leaving less room in your budget for a larger mortgage payment.

However, you may have several options to help, such as using savings or your tax-free pension lump sum to reduce the balance, or switching to a different mortgage deal with a longer repayment term if this is available. For some older homeowners, equity release could provide another option.

Could equity release help clear your mortgage?

If you’re aged 55 or over and have enough equity in your home, an equity release plan could potentially allow you to release some of that value and use it to repay your existing mortgage.

A lifetime mortgage is the most common type of equity release. You unlock a tax-free cash lump sum from your home without any mandatory monthly repayments to make on the loan. Instead, the loan and accrued interest are repaid when the plan ends. That’s usually through the sale of the house when you die or move into long-term care.

Lifetime mortgage rates have also remained higher than the much lower levels seen several years ago. On 1 August 2026, the best available equity release rate for a 70-year-old borrowing the maximum possible against a £200,000 property was 6.56%.

You may be offered a different rate depending on your circumstances and the plan you choose. Rates vary based on factors such as your age, how much you want to borrow, your property value and the features included in the plan.

For someone facing higher mortgage repayments in retirement, you may be able to unlock enough cash from your home to clear your mortgage. You can then choose to:

• Let the interest roll up: Allow the interest to be added to the amount owed each month.
• Pay some or all of the interest: Make regular payments to cover all or some of the monthly interest to reduce how quickly the balance grows.
• Make voluntary payments when you wish: All new plans approved by the Equity Release Council allow you to make ad hoc repayments, typically up to 10% of the original loan amount each year.

Equity release won’t be right for everyone, so it’s important to weigh up the potential benefits and drawbacks before making a decision. For instance, equity release will reduce the value of your estate and the amount of inheritance you leave. It may also affect your entitlement to some means-tested benefits. 

If you want to explore the option of equity release, please get in touch today. Our selected advisers are ready and waiting to answer your questions and provide your no-obligation quotations.

Call us free on 0808 178 3055 to speak to our friendly team, or request a free call back here for a time convenient for you.