Property-rich pensioners are taking record amounts of equity out of their homes to top up lowly pension incomes and to fund luxuries such as holidays and home improvements, new figures show.
That's an increase of 18 per cent on the previous quarter and 11 per cent on last year. Over the first six months of the year, £710m was released, more than any previous half-year period, according to trade website Professional Adviser.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
'Equity release' is a term used to described borrowing against property, whereby an individual receives cash equivalent to the value of a share of their home and repays the entire amount, plus interest, when the home is sold, typically on death or when they go into a care home.
The most common example is a 'lifetime mortgage', which allows for either a lump sum or regular withdrawals to be taken. While the products provide easy access to cash while allowing the person to remain in their home, they can be expensive relative to standard mortgages, with an average interest rate of a little more than six per cent.
Experts have offered a range of reasons for why equity release is currently on the up. Firstly, the amount of lifetime income that can be acquired by trading in a pension pot for a basic annuity has been falling – it is reportedly down 15 per cent over the past five years. Pensioners are taking cash from their home to top-up "a gap in their income" Nigel Waterson, chair of the Equity Release Council, said.
Others point to new mortgage rules which have reduced lending to older homeowners, suggesting equity release is actually being used by so-called 'trapped borrowers' to clear existing housing debt. Saga head of retirement Alex Edmans said the firm has "seen an increase in the use of equity release to clear a mortgage".
Finally, there are those who simply suggest a surge in property prices in recent years has opened opportunities for retirees to cash-in and fund luxuries. FTAdviser reports the most common use for the equity 'released' from a house is improvement of the home itself, which accounts for some of all of the cash taken by 58 per cent of borrowers, or to go on holiday, which is cited by a further 28 per cent
-
Confessions of a Brain Surgeon: an 'exceptional' documentaryThe Week Recommends Retired neurosurgeon Henry Marsh reflects on his pioneering work with exquisitely 'raw honesty'
-
A new subtype of diabetes was found and it may require different treatmentUnder the radar It is prevalent in Black Africans and Americans
-
Crossword: August 20, 2025The Week's daily crossword
-
The financial impact of returning to work in later life – should you 'unretire'?The Explainer Many people return to the workplace after retirement age, but what could it mean for your finances?
-
State pension underpayments: are you getting the right amount?feature Hundreds of thousands of women may have received less than they were owed
-
Early retirement: what is the ‘FIRE’ movement?feature Younger workers are aiming to quit the workforce early through extreme saving and investment
-
How women can bridge the gender pension gapIn Depth New figures have shown the extent of the problem for women in retirement years
-
How to plug the pension gap by buying National Insurance creditsfeature A temporary change in the state pension offers a ‘golden opportunity’
-
Are UK pensions safe?Today's Big Question Bank of England governor says its debt market support must end – but the multi-billion-pound scheme could be extended
-
Pensions: time to end the triple lock?In the Spotlight Ministers must decide whether to risk alienating older voters by ending guaranteed pension rises
-
Brits keeping 21 million ‘money secrets’ from friends and family, survey revealsSpeed Read Four in ten people admit staying quiet or telling fibs about debts or savings
