Property equity release market recuperates, reporting double-digit expansion. Is it wise to convert your property's value into immediate funds?
Updated Article:
Growing numbers of elderly homeowners are opting for equity release products to meet their later-life necessities and even bypass long healthcare waiting lists.
After a dip due to increased interest rates and slowing house price growth, interest in equity release appears to be bouncing back, especially as retirement costs skyrocket.
In the first quarter of 2025, there was a 11% yearly increase in new lifetime mortgages, the most popular type of equity release product, with a value of £530 million - an increase of 39.5%.
Retirement interest-only mortgages, while smaller, also showed a yearly 19% increase in number and a 17.9% increase in value.
There was also a 34% yearly increase in loans advanced to homeowners aged 55 and above, amounting to a value increase of 42.6%.
Jim Boyd, CEO of the Equity Release Council, commented on the UK Finance Later Life Lending Statistics: "The market is rapidly gaining popularity with older customers who rely on advisers to understand their various options, which include equity release, retirement interest-only mortgages, and later life mortgages."
Equity release allows homeowners over 55 to access the cash tied up in their property, often through a lifetime mortgage. Borrowers can receive a lump sum, with the remaining amount available for future usage, accruing interest only on the drawn down amount.
Sarah Coles, Head of Personal Finance at Hargreaves Lansdown, stated: "Lifetime mortgages are still prevalent, making up the majority of equity release deals. These enable homeowners to borrow against their home, with the interest rolling up and repayable when the property is sold, along with the loan itself."
Retirement interest-only mortgages, which require interest to be repaid monthly, are experiencing growth, offering homeowners a one-time cash injection for specific purposes, such as home improvements or healthcare expenses.
"Due to NHS delays caused by the pandemic, we've also seen people turning to equity release to fund hip or knee replacements," says Scott Gallacher, Director at financial advisory firm Rowley Turton. Gallacher has also noticed people using the product to finance solar panels and lower their energy bills.
However, equity release carries risks, including high fees, unclear terms, and the potential to limit inheritance by leaving your loved ones with a large bill when you pass away or move into care.
"Interest rates for lifetime mortgages are higher than standard mortgage rates, at between 7% and 8%, compared with around 5% for a traditional home loan," Coles explained. Borrowers should be fully aware of the implications for themselves and their families before entering into equity release agreements.
- As retirement costs rise, personal finance considerations in the realm of real estate become increasingly important, with the popularity of equity release products growing.
- Pensions alone might not suffice for some elderly homeowners, leading them to explore alternative avenues like equity release or retirement interest-only mortgages for additional funds.
- For those who prefer a lump sum, conventional equity release through a lifetime mortgage could be a viable option, providing access to cash tied up in property with the possibility of future usage.
- Investing in home improvements, healthcare expenses, or even renewable energy systems like solar panels could be facilitated by equity release products, offering an alternative funding solution for specific needs.
