The rise of equity release – Pattenden

One solution growing in popularity is equity release, which saw a 32% increase in activity in the first quarter of 2025 compared to the same period last year. 

Traditionally, equity release has been used by homeowners who are asset-rich but cash-poor. There are few alternatives for unlocking capital later in life. Downsizing is one option, as is the government’s Rent a Room scheme, which allows homeowners to earn up to £7,500 tax-free per year by letting a furnished room.

However, both approaches can be emotionally or practically difficult. Most people are reluctant to leave a well-loved home or share their space with tenants. Equity release offers a way to access funds with less disruption. 

That said, the product has its drawbacks. The compounding nature of rolled-up interest can quickly erode the value of an estate, reducing what beneficiaries may inherit. Accessing equity release can also be more difficult than expected. Property valuations are often lower than anticipated, and lenders tend to apply stricter property criteria than those seen with traditional mortgages.

While most lifetime mortgages are technically portable, in practice, moving home with one in place can be challenging. 

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What’s driving equity release demand? 

Despite these limitations, demand is being fuelled by several key factors. The government’s decision to include pensions within the estate for inheritance tax (IHT) purposes from April 2027 has prompted many to reconsider how they pass on wealth. Used as part of a broader estate planning strategy, equity release can help facilitate early transfers of wealth and reduce exposure to IHT.

Proceeds can be gifted to beneficiaries through Potentially Exempt Transfers, which fall outside the estate after seven years, or placed into trusts for added control and protection. In addition, the equity release loan itself reduces the overall value of the estate, potentially lowering any IHT liability. 

It’s also important to acknowledge the role of the Equity Release Council (ERC) in improving consumer confidence. In the 1990s, the market suffered from poor advice and inadequate products. Since then, the ERC has introduced robust consumer protections, including the no-negative-equity guarantee and the right to remain in the home for life. Their focus on clear advice, transparent terms, and high standards has helped reposition equity release as a credible option. 

In summary, equity release is becoming a mainstream tool for those seeking financial flexibility in later life.

With stronger safeguards, growing awareness, and strategic uses in estate planning, it is increasingly seen as a practical solution, not just a last resort.