Later Life Lending Q1 2026: Equity Release Falls, RIO Mortgages Rise

The headline numbers: Q1 2026 in full

UK Finance data for Q1 2026 shows 36,050 new loans were made to borrowers aged 55 and over, a fall of 4.8% compared with Q1 2025. The total value of those loans reached £6 billion — up 0.3% year-on-year, indicating that while transaction volumes fell, average loan sizes increased slightly (source: UK Finance / The Intermediary, May–June 2026).

The Equity Release Council (ERC) figures tell a more pronounced story for lifetime mortgages specifically. Total advances in Q1 2026 reached £574 million, a fall of 9% compared with Q4 2025. Customer numbers fell to 12,958 — down 7% quarter-on-quarter and 10% year-on-year. Within the lifetime mortgage category, 5,300 new loans were agreed, a fall of 8% year-on-year. The average new lump sum was £121,196, down 2% quarter-on-quarter.

Against that broader decline, RIO mortgage completions moved in the opposite direction. 353 RIO mortgages were advanced in Q1 2026, up 5.4% year-on-year, with total value unchanged at £33 million — indicating RIO mortgages are taking a growing share of a smaller overall market.

Why volumes are falling: rates since February 2026

The primary driver of the decline in lifetime mortgage activity is the rise in mortgage rates since February 2026. The escalation of conflict in the Middle East and its effect on global energy prices pushed market swap rates sharply higher from mid-February, and lender pricing on equity release products followed. The average two-year fixed residential mortgage rate now stands at 5.56% as of June 2026, compared to levels well below 4% before the conflict intensified.

Lifetime mortgage interest rates track the same underlying market benchmarks, with a spread. At higher rates, the long-term compounding cost of a lifetime mortgage increases significantly — and some prospective borrowers have chosen to pause and monitor the situation rather than commit at current pricing.

This is a rational response to rate uncertainty, but it is not without its own costs. Property values may not recover to current levels if prices soften further. And for homeowners who need the funds now — for care, for home adaptations, for family support — waiting for a rate that may or may not arrive is not always the right decision.

The difference between a lifetime mortgage and a RIO mortgage

The Q1 2026 data reflects an important structural shift: as lifetime mortgage rates have risen, more borrowers with sufficient income are opting for RIO mortgages instead. Understanding why requires clarity on how the two products differ.

Lifetime mortgage (equity release): No monthly payments are required. Interest is added to the outstanding balance and compounds over time. The loan — capital and accumulated interest — is repaid on the eventual sale of the property, typically on death or entry into long-term care. There is no affordability assessment based on income. The loan-to-value ratio available depends on your age. All Equity Release Council-compliant plans include a no-negative-equity guarantee, meaning you will never owe more than your property is worth.

Retirement interest-only mortgage (RIO): Monthly interest payments are required throughout the life of the loan. Because payments are made, the capital balance does not compound. The capital is repaid on property sale. Lenders carry out an affordability assessment based on income — typically pension income, rental income, or other reliable sources. RIO mortgages preserve the property's equity more effectively for inheritance because the loan balance does not grow.

Read the full comparison at retirement interest-only mortgages and how equity release works.

Which product is more suitable for you?

The choice between a lifetime mortgage and a RIO mortgage comes down principally to two factors: whether you have sufficient regular income to make monthly interest payments, and how important it is to preserve the property's equity for your estate.

• Lifetime mortgage may be more suitable if: you have no or limited regular income beyond your State Pension; you want to avoid any monthly payment obligation; or you need a larger lump sum than an affordability-assessed RIO mortgage would support.
• RIO mortgage may be more suitable if: you have reliable pension, rental, or other income to service monthly payments; you want to preserve as much property equity as possible for your estate; or you are concerned about the long-term compounding effect of a lifetime mortgage at current interest rates.

There are also intermediate solutions, including drawdown lifetime mortgages (which limit compounding by releasing funds in stages) and hybrid products. A qualified FCA-regulated adviser can map out the options that best fit your circumstances.

See current rate information at lifetime mortgage rates.

Adviser outlook: Q2 2026 looks more positive

Despite the decline in Q1 volumes, adviser sentiment is turning. ERC adviser survey data shows 46% of advisers expect enquiries to rise in Q2 2026, and 50% expect application volumes to increase over the same period. The rate environment, though higher than a year ago, is not expected to deteriorate significantly in the near term — particularly with the Bank of England signalling no appetite for further hikes at its June meeting.

This suggests that the Q1 pause may represent a period of adjustment rather than a structural retreat. Customers who deferred decisions while rates rose sharply from February to April are beginning to re-engage as the market stabilises.

For homeowners who have been considering later-life lending and put their research on hold during the rate uncertainty, now is a reasonable time to revisit the conversation — with no obligation at any stage. A Verity Home specialist provides FCA-regulated advice and could explain both options clearly, with no pressure to proceed.