Equity release is increasingly becoming a popular option for homeowners aged 55 and over in the UK.
In the first quarter of 2025, homeowners accessed £665 million through equity release, marking a 32% increase compared to the same period in 2024.
This growth reflects a broader trend where more homeowners are turning to their property wealth to support their financial needs in later life.
Why Are More People Choosing Equity Release?
Historically, equity release was often used for luxury expenses like holidays or home improvements. However, recent data indicates a shift towards more practical uses:
- Covering Care Costs: Many homeowners are using equity release to fund live-in or home care, allowing them to remain in their homes while receiving necessary support.
- Paying Off Existing Mortgages: A significant number of individuals are using released funds to clear outstanding mortgage debts, alleviating financial pressure in retirement.
- Supporting Family Members: Some homeowners are providing financial assistance to family members, such as helping children onto the property ladder.
How Does Equity Release Work?
Equity release primarily operates through two mechanisms:
- Lifetime Mortgages: This is the most common form. Homeowners borrow against the value of their property while retaining ownership. The loan, along with accumulated interest, is repaid when the homeowner passes away or moves into long-term care.
- Home Reversion Plans: Homeowners sell a portion of their property to a provider in exchange for a lump sum or regular payments, while retaining the right to live in the property rent-free until death or moving into care.
What Are the Costs and Considerations?
- Interest Rates: As of 2025, interest rates for equity release products range from 5.68% to 7% AER, reflecting an increase from previous years.
- Set-Up Costs: Setting up an equity release plan typically involves fees between £1,500 and £3,000, which can vary depending on the provider and complexity of the plan.
- Impact on Inheritance: Since the loan and interest are repaid from the sale of the property, the amount left to beneficiaries may be reduced.
- Eligibility for Benefits: Receiving a lump sum from equity release could affect eligibility for means-tested benefits, such as Pension Credit or Universal Credit.
Is Equity Release Right for You?
Equity release can be a valuable tool for homeowners looking to access the wealth tied up in their property.
However, it's essential to consider your individual circumstances, including your health, financial situation, and long-term plans.
Seeking advice from a qualified financial adviser is crucial to ensure that equity release aligns with your goals and doesn't inadvertently affect your financial security or that of your beneficiaries.
Sources
Risk Warnings
A lifetime mortgage is a long-term commitment which could accumulate interest and is secured against your home. Equity release is not right for everyone and may reduce the value of your estate.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
Date: 12 June 2025
