Housing wealth hits record high: is equity release right for you?

Homeowners in the UK have nearly £6tn worth of equity in their homes, according to new analysis by the Equity Release Council.

Around 60% of this total is held by over-55s, who have the option to unlock some of this wealth via equity release to provide extra funding in retirement. 

Here we explain how equity release works and what you need to consider before using it. 

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Majority of property wealth held by over-55s

Recovering house prices in the first half of 2024 have increased the total value of the nation’s property equity to £5.7tn. 

This surpasses the previous high of £5.6tn from mid-2022 when the housing market was boosted by pent-up demand after the pandemic.

Most (£3.4tn) of the UK's property equity is held by over-55s. The average over-55 owner-occupied household has an average of £321,213 of equity in their home.

Jim Boyd, CEO of the Equity Release Council, said: ‘Our findings make it crystal clear that your prospects of living comfortably in retirement will rest on firmer foundations if you own your own home and include property wealth in your financial plans.

‘Whether it is boosting income, managing unsecured debt, paying for care or helping to get family members onto the property ladder, there is a huge amount of potential tied up in bricks and mortar.’

How equity release can free up cash

Equity release is a way for over-55s to access some of the wealth in their homes while continuing to live there. 

With lifetime mortgages – the most common type of equity release – you take out a loan against your property, which is repaid from the proceeds of its sale when you die or move into long-term care.  

Unlike ordinary mortgages, lifetime mortgages don't require you to make any monthly repayments. 

Instead, interest is added to the loan each month, meaning the total amount owed can be far higher than the amount you originally borrowed, although you can reduce this by making voluntary repayments. 

• Find out more: what is equity release and how does it work?

Pros and cons of equity release

Equity release can prove useful if you have value tied up in your property but are worried about having enough to live on in retirement, paying for care or funding large expenses. 

You can use the tax-free cash however you wish and will be able to stay in your home for the rest of your life or until you move into care.

But it's not a decision to be taken lightly. It can be very expensive, especially if you don't make any voluntary repayments. This means the amount you can leave behind for loved ones will be reduced. 

If you change your mind, repaying your loan early often triggers an early repayment charge. 

• Find out more: more equity release pros and cons

How to arrange equity release  

If you do opt for a lifetime mortgage, you'll need to obtain regulated advice from a qualified equity release adviser. This is a requirement of the Financial Conduct Authority.

Companies selling equity release must offer advice. The Equity Release Council has a directory of financial advisers with equity release experience.

You should use an adviser who isn't restricted to recommending products from just one or two firms.

Equity release brokers such as HUB Financial Solutions, Age Partnership and Key Later Life Finance can look across the whole of the market to find the product that meets your specific requirements.

What are the alternatives?

Equity release is most suitable if you’re older, own an expensive property outright that’s expected to increase in value, and you don’t intend to pass it on when you die. 

If you decide that equity release isn’t for you, here are some alternatives: 

• Downsizing Our recent investigation found you can potentially unlock hundreds of thousands of pounds by moving to a smaller property, even after paying stamp duty.
• Remortgaging Increasing numbers of lenders offer retirement interest-only mortgages (RIOs). These allow you to pay off the interest on the loan each month, and the original value of what you borrowed is repaid when you die or move out.
• A personal loan or credit card For smaller amounts, borrowing via an unsecured personal loan or interest-free purchase credit card could be much cheaper than equity release, as long as you can keep up with repayments.
• Rent a room If you have a spare room in your home that you’d be happy to rent out, the government’s Rent a Room scheme lets you earn up to £7,500 a year tax-free. The tax exemption is automatic, so you only have to fill in a tax return if you earn more than £7,500 in any year.

Which? Limited is registered in England and Wales to 2 Marylebone Road, London NW1 4DF, company number 00677665  and is an Introducer Appointed Representative (FRN 610689) of the following:

1. Inspop.com Ltd for the introduction of non-investment motor, home, travel and pet insurance, who are authorised and regulated by the Financial Conduct Authority (FCA) to provide advice and arrange non-investment motor, home, travel and pet insurance products (FRN310635). Inspop.com Ltd is authorised and regulated by the Financial Conduct Authority (FCA) to provide advice and arrange non-investment motor, home, travel and pet insurance products (FRN310635) and is registered in England and Wales to Greyfriars House, Greyfriars Road, Cardiff, South Wales, CF10 3AL, company number 03857130. Confused.com is a trading name of Inspop.com Ltd. 

2. LifeSearch Partners Limited (FRN656479), for the introduction of Pure Protection Contracts and Private Health Insurance, who are authorised and regulated by the FCA to provide advice and arrange Pure Protection Contracts and Private Health Insurance Contracts.  LifeSearch Partners Ltd is registered in England and Wales to 3000a Parkway, Whiteley, Hampshire, PO15 7FX, company number 03412386.

3. HUB Financial Solutions, for the introduction of equity release advice, who are authorised and regulated by the Financial Conduct Authority (‘FCA’) to provide advice and guidance on financial products for those who have retired or are approaching retirement (FCA Firm Reference Number: 455713). HUB Financial Solutions is registered in England and Wales to Enterprise House, Bancroft Road, Reigate, Surrey RH12 7RP, company number 05125701.

4. Alan Boswell Insurance Brokers Ltd (FRN 301), for the introduction of non-investment landlord insurances, who are authorised and regulated by the Financial Conduct Authority to provide advice and arrange insurance contracts. Alan Boswell insurance brokers Ltd is registered in England at Prospect House, Rouen Rd, Norwich NR1 1RE, company number 02591252.

Other financial services:

Mortgage service provided by London & Country Mortgages (L&C), Unit 26 (2.06), Newark Works, 2 Foundry Lane, Bath BA2 3GZ. London & Country are authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.

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