Equity release or a mortgage? Why older borrowers are choosing ordinary home loans

Should you choose equity release or a mortgage? Ordinary residential mortgages outnumbered lifetime mortgages by three-and-a-half to one among borrowers aged over 55 in the second quarter of 2026.

The figures, in UK Finance’s Later Life Lending Update for Q2 2026 published in August, show 37,300 new loans to older borrowers, including 19,943 residential mortgages and 5,730 lifetime mortgages.

New Newspage research, sponsored by Harbour Home Finance Ltd, found lifetime mortgages accounted for 15.4% of new later-life loans during the quarter – slightly fewer than one in six.

Lifetime mortgages represented an even smaller share by value. Of the £6.2 billion lent to over-55s, £490 million, or approximately 8%, went through lifetime mortgages.

The figures suggest homeowners looking to release money from their properties in later life are increasingly choosing conventional mortgages where their income and circumstances allow.

What is the difference between equity release and a mortgage?

Equity release allows homeowners aged 55 or over to access some of the money tied up in their property without moving. It is usually arranged through a lifetime mortgage, a long-term loan secured against the home.

Unlike an ordinary mortgage, a lifetime mortgage does not normally require compulsory monthly repayments. Instead, the unpaid interest can be added to the loan, with interest then charged on the growing balance.

This compounding can substantially increase the amount owed. At an interest rate of 6%, a balance on which no interest is repaid would approximately double in 12 years.

A conventional residential or retirement interest-only mortgage can prevent that compounding because the borrower makes monthly payments. However, applicants must demonstrate that those payments are affordable, potentially including after one partner dies or household income falls.

Matthew Fleming-Duffy, Founder at Wimborne-based Harbour Home Finance, said: "I don't think the conversation should start with ‘equity release or a mortgage?’, but with what the client is trying to achieve. I regularly consider mortgages into retirement, Retirement Interest-Only (RIO) mortgages and lifetime mortgages. Higher lifetime mortgage rates have certainly changed the numbers, particularly given the effect of compounded interest over time. But conventional borrowing isn't automatically better – it requires affordability assessments, monthly payments and generally a defined term. 

“I've helped clients refinance lifetime mortgages with conventional borrowing, but equally recommended lifetime mortgages where peace of mind, flexibility and no compulsory monthly payments were more important. Good later life advice means considering all the options, including downsizing, and finding the right solution for the individual rather than starting with a particular product.”

Why are fewer older homeowners choosing equity release?

Lifetime mortgages represented 22.7% of the 44,000 later-life loans recorded during the second quarter of 2019, compared with 15.4% in the same quarter of 2026.

There were approximately 1.9 ordinary residential mortgages for every lifetime mortgage in 2019. By 2026, that ratio had risen to around 3.5 to one.

Separate figures from the Equity Release Council also show how the market has contracted. It recorded 10,731 new equity-release customers in the second quarter of 2019, compared with 5,307 during the same period of 2026 – a fall of more than half.

Higher interest rates are one possible explanation. They increase the cost of both conventional and lifetime mortgages, but their effect can become particularly pronounced when lifetime mortgage interest is rolled up over many years.

Nouran Moustafa, Practice Principal & IFA at Roxton Wealth, said: "Higher rates have completely changed the equity-release conversation. At 6%, rolled-up debt roughly doubles in 12 years. For someone in their 60s who may remain in the property for decades, that can consume a huge amount of future equity, particularly if house-price growth is weak. RIO or even a standard mortgage can sometimes be better because servicing the interest stops that compounding. 

"But they are not substitutes available to everyone. The borrower still needs sufficient sustainable income and must pass affordability. That is why RIO volumes remain tiny compared with lifetime mortgages. I increasingly think the first question should not be ‘which equity-release product?’ but ‘do we need equity release at all?’

“Before choosing either route, ask what happens to the debt in 10, 20 and 30 years, whether payments remain affordable after one partner dies, and how much housing wealth you want to preserve. Later-life borrowing should solve a problem, not quietly create the next one.”

Is a lifetime mortgage more expensive than a normal mortgage?

A lifetime mortgage can ultimately cost more where the borrower makes no repayments and interest is added to the outstanding balance. The longer the loan remains in place, the greater the potential effect of compound interest.

However, that does not automatically make an ordinary mortgage the right choice. Conventional mortgages require affordable monthly payments and normally have a defined term, while some older borrowers may not have sufficient pension or employment income to pass a lender’s assessment.

Stephen Perkins, Mortgage Broker and Managing Director at Norwich-based Yellow Brick Mortgages, said: "At today's rates, the compounding cost of a lifetime mortgage can become significant very quickly, so equity release needs more scrutiny than it did when rates were lower. For some homeowners, a standard or retirement interest-only mortgage will offer better value if the monthly payments are comfortably affordable, but that affordability test is exactly what can rule many older borrowers out.

“The right question is not simply which product has the lowest rate today, but whether the borrower wants or is able to service the interest, how much flexibility they need and how important preserving equity is to them. Where equity release is still the right fit, making voluntary interest payments or repayments where the product allows can materially reduce the long-term effect of compounding. It should be a considered later-life planning decision, not a default choice based on age.”

When can equity release still be suitable?

Equity release can remain an option for people who need to access property wealth but cannot afford or do not want compulsory monthly repayments.

It may allow an older homeowner to remain in their home, repay an expiring interest-only mortgage, fund adaptations or care, or manage other essential expenses. The trade-off is that the growing debt can reduce the equity eventually left to the homeowner or their family.

Chris Barry, Director at London-based Thomas Legal, added: "Equity Release figures have stayed fairly consistent over the past year which is roughly half the volume prior to the Truss budget when bond yields spiked. The market changed from clients who borrowed money for discretionary expenditure to borrowing for essentials such as replacing an interest only mortgage. 

“Even borrowing to mitigate IHT liabilities is becoming uneconomical for most. The equity release market will always have a place as it allows people to stay in their home for the rest of their days and this will appeal to an ageing population. The eventual downside is that inheritance will be eaten away meaning children and grandchildren will need to find alternative ways to fund their house deposits or renovations.”

Simon Bridgland, Broker at Canterbury-based Charwin Private Clients, said borrowers should put aside their preconceptions and consider the full market.

He added: "The clear winners searching in the later life market are those who bury any preconceived ideas and look across all available options. With the majority of new cases being arranged for needs based lending rather than aspirational it’s clear that older borrowers are feeling the pressure from living costs and lingering debt. 

“Lenders have been tightening criteria due to a cooling property market, and rising gilt yields, meaning borrowers who require the most generous loans have often been falling short of the figure they desperately need. In some cases forcing them to seek other services such as debt counselling as they simply cannot make it fit the tightening belt lenders use to hold in the debt bulge. Equity release isn’t for everyone and there are other options to consider, but if numbers fit it can be life changing.”

What should older borrowers compare before taking out a loan?

Older borrowers should compare the total projected debt rather than looking only at the initial interest rate or monthly payment.

That means considering how much could be owed after 10, 20 or 30 years, whether payments would remain affordable following bereavement or a fall in income, and how much housing wealth they want to preserve.

The alternatives may include a standard residential mortgage, a retirement interest-only mortgage, a lifetime mortgage, downsizing or using other savings and investments.

Borrowers should also establish whether the product allows voluntary interest or capital payments, what early-repayment charges apply and when the loan must be repaid.

Malcolm Davidson, Director at Hull-based UK Moneyman, said: “When it comes to clients aged 50 and above, it's certainly not all about the interest rate as each individual's circumstances and future plans must be considered in the round. 

"The rates on Equity Release plans are certainly higher now, but the same applies to standard mortgages so it's essential for more mature borrowers to check that the firm or adviser they are engaging with considers all the options out there and don't operate in a ‘silo’ where an adviser only has one tool in their toolbox.”

Questions answered by Matthew Fleming-Duffy, Founder at Harbour Home Finance

Is equity release better than a mortgage? 

Not necessarily. Equity release refers to either a lifetime mortgage or a home reversion plan, with lifetime mortgages offering considerable flexibility, including no fixed repayment date, no compulsory monthly payments and, with some products, the option to draw funds as and when you need them. Conventional mortgages generally offer lower interest rates but require affordability assessments and committed repayments, so the right solution depends on individual circumstances and objectives.

Can I get a mortgage over the age of 55? 

Absolutely. Many lenders offer conventional mortgages to people over 55, with some having no maximum age limit. Depending on your circumstances, you might also qualify for a retirement interest-only (RIO) mortgage or a lifetime mortgage, so it's worth speaking to a suitably qualified later life finance adviser who can help you explore all the options.

Equity release vs retirement interest-only mortgage: what's the difference? 

The biggest difference is monthly repayments. With a typical lifetime mortgage, there are no compulsory monthly payments and interest is rolled up, whereas a RIO mortgage requires you to demonstrate affordability and pay the interest each month. Both solutions have no fixed repayment date, with the loan usually repaid when the property is sold following the death or permanent move into long-term care of the last borrower.

How much does equity release cost over 10 years? 

That depends on the amount borrowed, interest rate and whether you make repayments. For example, borrowing £100,000 on a lifetime mortgage at a fixed interest rate of 6.50%, with no repayments, would see the debt grow to approximately £191,000 after 10 years - around £91,000 in interest alone. This is why I always discuss the impact of compounding interest and the benefits of making voluntary payments, where affordable, and only drawing funds when they're needed.

Can you pay off equity release early? 

Yes, you can repay a lifetime mortgage early, but it's important to understand any early repayment charges. Many modern products have fixed charges that reduce over time, whilst others have variable charges linked to UK government gilts. Most also offer penalty-free partial repayments and exemptions in certain circumstances, so understanding the likelihood of early repayment is an important part of choosing the right product.