This report analyses the 2026 UK equity release and later life lending landscape, focusing on interest rate shifts, regulatory changes, and technological innovations in equity release. It is an update on our article “More Flexibility, Better Protections: Why Equity Release Mortgages Are Evolving in 2025”, written in 2025, which looked in depth at the Equity Release market last year.
2026 UK Equity Release Interest Rate Outlook for 2026
Table of Contents
The Bank of England’s base rate has entered a stabilisation phase following the volatility of 2023–2025. Experts project the base rate will settle between 3.25% and 3.50% by mid-2026.
This decline is supported by inflation (CPI) cooling toward the 2% target, enabling more competitive pricing for lifetime mortgages.
Table: 2026 Financial Institution Forecasts
Institution | Base Rate (End 2026) | Market Outlook |
Bank of England | 3.25% – 3.50% | Gradual easing |
HSBC / UBS | 3.00% | Aggressive competition |
Capital Economics | 3.50% | Stable plateau |
Oxford Economics | 3.00% | Easing / Low demand |
Pantheon | 4.00% | Cautious / Inflation risk |
Market Performance: 2025 Retrospective
In 2025, the equity release market grew by 11% , with total lending reaching £2.57 billion. This growth reflects the transition of property wealth into a mainstream retirement planning tool.
- Average Release: £123,174 (up 5.7% year-on-year).
- Primary Drivers: 26% of borrowers used funds to clear existing mortgages, while 40% focused on lifestyle goals like home improvements (21%) and intergenerational gifting (13%).
Regulatory Changes: FCA Later Life Lending Study and 2026 UK equity release
Q1 2026 marks the launch of the Financial Conduct Authority (FCA) Later Life Lending Market Study. This study aims to modernise the mortgage framework for an aging population, making 2026 UK Equity Release more accessible and secure.
Key 2026 Regulatory Milestones:
- Targeted Support (April 2026): A new regime allowing firms to provide group-based guidance without the high costs of full holistic advice.
- RIO Reform: The FCA is reviewing Retirement Interest-Only (RIO) requirements to increase accessibility and potentially exempt them from higher Loan-to-Income (LTI) limits.
- CCI Regime (April 2026): The Consumer Composite Investments regime replaces PRIIPs, giving firms more flexibility in how they present product value and metrics to consumers.
Artificial Intelligence and Underwriting
Q1 2026 marks the launch of the Financial Conduct Authority (FCA) Later Life Lending Market Study. This study aims to modernise the mortgage framework for an aging population 2026 UK equity release.
Key 2026 UK Equity Release Regulatory Milestones:
- Targeted Support (April 2026): A new regime allowing firms to provide group-based guidance without the high costs of full holistic advice.
- RIO Reform: The FCA is reviewing Retirement Interest-Only (RIO) requirements to increase accessibility and potentially exempt them from higher Loan-to-Income (LTI) limits.
- CCI Regime (April 2026): The Consumer Composite Investments regime replaces PRIIPs, giving firms more flexibility in how they present product value and metrics to consumers.
Table: Impact of AI on Lending Operations
AI Application | 2026 Capability | Strategic Benefit |
Underwriting | Relationship-based AI | Dynamic risk assessment |
Service | Agentic Models | Human-level complex tasking |
Security | Generative AI | Real-time fraud/identity detection |
Housing Market: 2026 London and South East Outlook
London and the surrounding South East regions are entering 2026 with subdued price growth compared to more affordable northern markets.1 While national averages are rising, high entry costs and stretched affordability continue to dampen sentiment in the capital and its commuter belts.2
Regional Performance Data:
- London: Asking prices in the capital showed resilience with a 0.9% annual increase as of January 2026 4, outperforming the broader South East but still lagging behind the national average on a five-year basis.1
- South East: This region experienced a joint-largest annual fall of 1.6% in early 2026, despite a monthly rebound in activity.4 Localised falls were notable in areas like Rother in Sussex, which saw values decline by 4.7% late in the previous year.1
- Prime Central London: This high-value segment saw a 4.8% value drop in 2025; while activity is beginning to pick up, experts forecast only modest adjustments rather than significant growth for 2026.5
Table: Regional Performance Data
Region | 2026 Performance Outlook | Key Characteristic |
London | +0.7% to +0.9% | Shallow demand; committed buyers only 1 |
South East | -1.6% (Annual) | Highly price-sensitive; affordability constraints 2 |
East Anglia | -0.8% (Annual) | Only region to see annual falls in late 2025 1 |
Prime Central London | Modest Price Falls | Impact of tax and regulatory changes 5 |
ESG and Green Equity Release
Energy efficiency is a core part of 2026 mortgage underwriting. “Green Mortgages” offer lower interest rates or cashback for properties with an Energy Performance Certificate (EPC) rating of A or B.
Table: Green Financial Incentives
Incentive | Typical Value | Eligibility |
Rate Discount | 0.10% – 0.30% | EPC A/B rating |
Cashback | £500 – £1,500 | Meeting energy milestones |
Boiler Grant | Up to £7,500 | Low-carbon replacements |
VAT Relief | 0% – 5% | Energy-saving installs (to 2027) |
Summary: 2025 vs. 2026
Aspect | 2025 Reality | 2026 Evolution |
Market Tone | Recovery / Volatile | Stability / Predictable |
Interest Rates | 3.75% – 4.75% | 3.25% – 3.50% |
FCA Focus | Consumer Duty Launch | Market Study / RIO Reform |
AI Stage | Generative Hype | Agentic Integration |
Property Growth | Subdued (0.7%) | Steady (1.0% – 4.0%) |
Frequently Asked Questions (FAQs)
What is the minimum age for equity release in 2026?
Generally, the minimum age requirement for most equity release schemes remains 55. However, some specialized products, such as “Payment Term Lifetime Mortgages,” are now available for homeowners as young as 50.
What exactly is the "No Negative Equity Guarantee"?
This is a standard safeguard for all Equity Release Council-approved plans. It ensures that you or your estate will never owe more than the final sale value of your home, even if that value drops below the outstanding loan amount.
What are the most common uses for released equity?
In 2025, the most popular “positive” use was home improvements (21%), followed by intergenerational gifting (13%) and holidays (6%). A significant portion of borrowers (26%) also use funds to clear an existing residential mortgage.
What is the average age of a typical equity release borrower?
Current statistics show the average age for a new equity release customer is between 70 and 72 years. While the core market is aged 65+, there is an increasing trend of borrowers in their late 50s using it for strategic retirement planning.
Can I still move house if I have a lifetime mortgage?
Yes. Modern plans are “portable,” meaning you can move your lifetime mortgage to a new property as long as that property meets your lender’s current criteria. If you have held the plan for at least three years and the new home does not meet criteria, “Downsizing Protection” may allow you to repay the loan without penalties.
Disclaimer
A Lifetime Mortgage will reduce the value of your estate and may affect your entitlement to means-tested benefits and tax status. The impact of not servicing monthly interest payments on a Lifetime Mortgage is that the outstanding debt can grow rapidly, thus reducing the value of your estate.
For example, if the interest rate was 7% a year, a £50,000 loan would double to £100,000 after 10 years assuming no repayments are made. This is an example for illustrative purposes only and personalised advice and recommendations should be sought from a qualified professional.
You are strongly advised to register a lasting power of attorney. This will allow your affairs to be managed by somebody else if your mental abilities significantly decline.
References
- UK Housing Market Update – January 2026 – Savills, accessed on January 28, 2026, https://www.savills.co.uk/research_articles/229130/385659-0
- What’s next for the UK housing market in 2026? – Lloyds Banking Group plc, accessed on January 28, 2026, https://www.lloydsbankinggroup.com/insights/whats-next-for-the-uk-housing-market-in-2026.html
- UK House Price Predictions 2026 – HomeOwners Alliance, accessed on January 28, 2026, https://hoa.org.uk/advice/guides-for-homeowners/i-am-buying/house-price-forecast/
- Record price jump: Housing market update January 2026 | Property news – Rightmove, accessed on January 28, 2026, https://www.rightmove.co.uk/news/articles/record-january-house-price-jump-jan26/
- Prime house price forecasts 2026, accessed on January 28, 2026, https://www.savills.co.uk/research_articles/229130/386389-0