Equity release lending climbs as homeowners tap home value in retirement

Equity release lending rose 10% year-on-year in the second quarter of 2025, according to the Equity Release Council, as more homeowners tap the value of their homes to fund retirement. The council's latest quarterly report shows lending across the market gaining momentum as more households consider options to access cash tied up in their property.

Equity release loans, also known as lifetime mortgages and home reversion plans, let homeowners access a tax-free loan worth up to 60% of their home's value while remaining the sole owner of the property. Borrowers can use the money for anything they like, with common uses including paying off debts, funding home improvements, gifting to family, or funding holidays in retirement. The loan is repaid when the borrower dies or goes into long-term care, and interest accrues on the remaining balance, meaning the amount owed grows over time. Some plans allow partial repayments or interest payments to limit how much debt rolls up, and all customers with providers that are members of the Equity Release Council are guaranteed the right to make penalty-free partial repayments. It is important to understand that equity release reduces the value of the estate and may affect means-tested benefits.

Lifetime mortgages account for the vast majority of equity release products, while home reversion plans are far less common. In a lifetime mortgage, the borrower remains living in the home and repays the loan from the sale proceeds after death or entering long-term care. Home reversion, by contrast, involves selling a share of the home’s value to a lender for less than its current market value, with the borrower typically continuing to live there as a tenant without paying rent until death or long-term care. The lender then receives its share of the sale proceeds. Both options carry risk, including reduced inheritance and exposure to property-market moves, so readers are advised to review terms carefully. The no negative equity guarantee offered by Equity Release Council members means borrowers will not owe more than the sale proceeds, even if the home’s value declines.

The interest rate landscape for equity release is higher than mainstream mortgages, with current rates typically ranging from about 6% to 9%. The Equity Release Council’s quarterly data show an average APR of 7.24% for Q2 2025, up from 6.64% a year earlier. When shopping, consumers should compare APR and fixed-rate options, as fixed rates provide certainty about the lifetime cost of the loan, while variable rates may carry caps to limit spikes in payments. In addition, borrowers should factor in arrangement fees and the compounding effect of roll-up interest, which can significantly increase the total debt over time. Maximum loan-to-value remains around 60%, with lower LTVs generally commanding lower rates.

Eligibility for a lifetime mortgage generally requires the applicant to be a homeowner aged 55 or older who uses the home as their main residence. If there is an outstanding mortgage, part of the equity release loan is typically used to repay it. Prospective borrowers should seek professional financial advice to confirm suitability and to understand how equity release could affect means-tested benefits and the eventual size of the estate.

To assist readers in evaluating options, This is Money has chosen to introduce Royal London Equity Release Advisers as a resource. The advisers offer no-obligation appointments and can search the market, comparing more than 500 products to find a plan that fits a borrower’s needs. The program notes that Royal London Equity Release Advisers operates as a trading style of Responsible Life Limited and is introduced through This is Money where applicable.

Drawdown or lump-sum options allow borrowers to access funds as needed or in one go. Some plans also let borrowers opt to pay only the interest for a period to limit how quickly the debt grows. Each product catalogue includes a mix of features, and advisers can tailor recommendations around goals, such as debt reduction, home renovation, or funding retirement leisure.

Alternatives to equity release include downsizing to a smaller property, which can unlock cash without ongoing interest charges, and retirement interest-only mortgages, which let homeowners pay only the interest until death or long-term care, with the principal repaid from the sale of the home. Remortgaging at a higher loan-to-value or extending the term can also spread payments, though this often increases total borrowing costs. Ultimately, the decision to release equity should hinge on clear goals and a plan for long-term affordability.

For those who do move homes, Equity Release Council-approved lenders generally allow the loan to move with the borrower, applying to the new property as continuing security. In many cases, a move to a lower-valued property may trigger a partial repayment to keep the loan within lending limits. Some plans include downsizing protections that let borrowers repay the loan in full when moving to a smaller home without charges. While moving can preserve access to funds, it can also require careful reassessment of the loan’s terms and the resulting impact on future wealth.

In all cases, equity release reduces the size of the estate available to heirs and can affect eligibility for certain means-tested benefits, though it does not affect the state pension. A no negative equity guarantee ensures borrowers or their estates will not owe more than the home’s sale value, but heirs may receive little or nothing from the property’s equity if the loan exceeds the remaining value.

Experts emphasize the importance of thorough planning. Know your goals and how much you need to meet them, discuss options with family members to avoid surprises, and obtain independent financial advice to compare products, costs, and long-term implications. Borrowers are urged to borrow only what they need and to understand how fees and compound interest affect the overall cost, since rising debts can erode retirement savings. By weighing the benefits against the potential downsides and exploring alternatives, homeowners can make a more informed decision about whether equity release is right for them.