With rising living costs and tighter tax rules, this financial tool is gaining popularity—especially among older homeowners. But what’s driving this trend, and what should people be aware of before making a decision?
Why Are More People Using Equity Release?
The recent surge in equity release is linked to changes in inheritance tax thresholds.
With some estates now facing higher tax liabilities, many homeowners are choosing to unlock property wealth during their lifetime rather than leave it untouched for beneficiaries.
Equity release schemes allow individuals— typically over 55—to access money from their homes without selling them.
This can help cover retirement expenses, provide financial support to family members, or simply make everyday living more affordable.
Economic pressures are also influencing this rise.
A recent report revealed a 35% increase in equity release applications, showing how many people are using this method to cope with rising costs and uncertain financial futures. In fact, 60% of over-65s now report concerns about long-term financial stability.
What Are the Risks of Equity Release?
While equity release offers fast access to cash, it comes with significant long-term considerations. Most plans involve borrowing against the value of your home, with repayment typically delayed until the property is sold or the homeowner passes away.
The main risk is compound interest, which can quickly reduce the amount of equity left in the property. This means your family may inherit much less than expected. Some people also find themselves locked into agreements that aren’t flexible if their circumstances change.
Financial experts warn that many homeowners don’t fully understand the terms of equity release before signing up. Without proper advice, it’s easy to overlook hidden costs and future implications.
How Can Homeowners Make the Right Choice?
Before committing, it’s crucial to seek independent financial advice. Equity release isn’t suitable for everyone, and alternative options—such as downsizing or using savings—may be more appropriate in some cases.
Comparing different providers and understanding the full terms of each scheme is key. Some offer more flexibility than others, including the option to make voluntary repayments or protect a portion of the home’s value for inheritance.
Steve Gauke of inheritance advance provider Provira commented: “We have seen a significant increase in demand for loans to cover the cost of inheritance tax bills, particularly when the estate is comprised of non-liquid assets. Our Estate Advance provides executors with immediate access to funds based on the value of those assets.”