Is equity release a good idea in 2025 if you are a homeowner thinking about accessing the money tied up in your biggest asset?

Equity release has emerged as a significant financial option for older homeowners in the UK who are looking for extra funds in retirement, as evidenced by lending averaging £700m per quarter in 2023.¹

While many have decided to harness their property in this way, how do you know whether equity release is the right approach for you? 

At SovereignBoss, our mission is to do the kind of research that will enable our readers to make more informed decisions as they embark on their retirement financial journey. 

All our content undergoes extensive quality and compliance checks before publication so you can rest assured that you are being presented with only the most relevant and useful information. 

In this article, we will look into the rising popularity of equity release, its benefits and potential drawbacks, and which essential considerations to keep in mind if you want to make an informed decision.

Here is what we have uncovered.

Why Has Equity Release Gained Popularity?

Equity release has gained popularity thanks to rising property values and the increasing cost of living.

According to a 2022 study by Legal & General, a quarter of borrowers who take out equity release do so because their income cannot keep up with rising bills.²

This is borne out by a 2025 survey conducted by Boon Brokers, which found that covering everyday living costs came out as borrowers’ top reason for taking out equity release loans.³ 

Equity release lifetime mortgages have become many people’s go-to option because of the change they have seen in the value of their homes: A house bought in 1980 may, theoretically, have increased in value by 1,145% by 2021.⁴

How Has the Popularity of Equity Release Schemes Changed Over Time in the UK?

The popularity of equity release has increased significantly over the last decade, as can be seen in the increasing amounts of cash unlocked.

According to official statistics released by the Equity Release Council (ERC), 2021 saw total lending of £4,8 billion, a figure that rose to £6,2 billion in 2022.⁵

However

2023 saw a dip in activity in the first half of the year as higher interest rates discouraged some potential customers from borrowing against their property.⁶

Total lending in the third quarter of 2023 was £716 million, down 88% from the same quarter in 2022.⁷

What Do Key Equity Release Statistics Tell Us?

The UK equity release market has been growing steadily, but at a slower pace than in previous years.

According to the Equity Release Council (ERC), in Q3 2023, new equity release plans increased by 10% compared to Q2 2023, indicating a slight improvement in consumer confidence and market conditions.⁸

Nevertheless

The number of new plans remained 45% lower than Q3 2022, which saw a record number of 13,452 new plans.

The market is still adjusting to the higher interest rate environment and disruption caused by the mini-Budget of 2022, which introduced changes to the inheritance tax and capital gains tax regimes.⁹

The Benefits of Tapping into Your Home’s Equity

The primary benefits of tapping into your home’s equity include accessing a lump sum or regular income, staying in your home, and having no monthly repayments. 

Potential advantages to consider include:

• Access to cash: An equity release loan provides immediate funds through a lump sum or ad hoc withdrawals.
• No monthly repayments: Lifetime mortgage plans do not require monthly repayments; the loan is repaid when you die or move into long-term care.
• Staying in your home: This type of loan allows you to remain in your home while accessing its value.
• Fixed interest rates: Most lifetime mortgage products offer fixed interest rates, providing financial certainty.
• Financial flexibility: The funds accessed in this way can be used for various purposes, such as supplementing your retirement income, making home improvements to improve accessibility, repaying other debts, or helping family members.

The Potential Drawbacks

The potential drawbacks of equity release include interest accumulation, reduced inheritance, and potential impacts on means-tested benefits.  

Significant potential disadvantages include:

• Interest accumulation: Compound interest can significantly increase the amount owed over time.
• Reduced inheritance: Accessing your home’s equity will decrease the value of your estate, leaving less for your heirs.
• Costs and fees: These include arrangement, valuation, and legal fees, which can be substantial.
• Impact on benefits: An equity release loan may affect your eligibility for means-tested state benefits.
• Long-term financial impact: As the loan amount increases over time owing to compound interest, the equity remaining in your home decreases. This can restrict your options if you need to access additional funds later or if you encounter unexpected financial challenges. 

Making an Informed Decision

Making an informed decision about equity release requires a thorough understanding of the products available and their long-term implications. 

A good start, as outlined below, would be to weigh the immediate benefits against future financial impacts and consider alternative options.

Remember

Equity release is a significant financial decision. 

Before proceeding, seek independent advice to understand the implications fully, and consider alternatives like downsizing or other financial products.

Factors to Consider Before Proceeding With Equity Release

Before proceeding with equity release, consider your long-term financial needs, the impact on your estate, and how it might affect your eligibility for state benefits. 

Assessing your current and future financial situation will help determine if this is the best option for you.

How Your Decision Impacts Future Inheritance & State Benefits

Releasing equity from your home reduces the value of your estate, potentially leaving less for your heirs. 

Additionally, the extra funds may affect your eligibility for means-tested state benefits, such as Pension Credit or Council Tax Reduction.

Navigating the Risks & Safeguards

Navigating the risks and safeguards is essential when it comes to equity release. 

Risks include the potential for rising debt due to compound interest and the implications for inheritance, whereas safeguards like fixed interest rates and the No Negative Equity guarantee can mitigate some of these risks.

But who implements these safeguards?

Protection Through the Equity Release Council

The Equity Release Council (ERC)¹⁰ provides standards and protections for consumers, including ensuring that you can stay in your home for life and that the interest rates are fixed or capped. 

Membership in this council is a sign of a trustworthy provider, as ERC members follow a strict code of conduct, ensuring transparency and consumer protection.

The Role of the FCA

The Financial Conduct Authority (FCA)¹¹ regulates equity release products, ensuring they meet high standards of fairness and transparency. 

The FCA’s oversight helps protect consumers from unscrupulous practices and ensures that advisors offer sound, unbiased advice.

Expert Advice & Legal Counsel

Seeking expert advice and legal counsel is vital—and mandatory—when considering equity release.¹² 

A financial advisor can provide tailored advice based on your individual circumstances, while a solicitor can help navigate the legal aspects of the agreements.

The Importance of Independent Advice

Independent financial advice ensures that you receive unbiased recommendations tailored to your situation. 

Advisors not tied to specific providers can offer a broader view of the options available, helping you make a well-informed decision.

Checking Your Advisor's Credentials

Ensure your advisor is qualified and experienced in equity release by checking their credentials. 

Look for membership of the Equity Release Council by consulting their database¹³, and verify your advisor’s standing with the Financial Conduct Authority¹⁴.

Can Equity Release Affect Your Financial Future?

Equity release can significantly affect your financial future, mainly because of the long-term effects of compound interest. 

The interest on lifetime mortgages can grow rapidly as it rolls up, impacting the amount of equity left in your home, which makes it crucial to understand how this will affect your finances over time.

For instance, having less equity available will mean you may not be able to borrow against your home again.

Can Equity Release Affect Your Retirement Plans?

Equity release can provide a crucial boost to retirement income, allowing you to enjoy a more comfortable lifestyle. 

However, remember to balance this benefit against the potential reduction in your estate's value and the impact on your long-term financial health.

In other words

Equity release can be a tool to support your retirement plans, but it should not jeopardise your long-term financial security.

Exploring Alternatives to Equity Release

Alternatives to equity release include downsizing to a smaller property, renting out a part of your home, or considering other financial products like Retirement Interest-Only (RIO) mortgages. 

Exploring these options can help determine the best course of action for your needs.

When Is Equity Release a Good Idea for Homeowners?

Equity release can be a good idea if you have first explored your alternatives and it has been recommended by a financial advisor or broker.

It can be a viable option for homeowners who wish to supplement their retirement income, pay off debts, or finance home improvements, without having to sell or move out of their homes.

When Should Homeowners Avoid Equity Release?

The impact of equity release on inheritance, any planned moves in the near future, and on means-tested benefits may mean that equity release is not a good idea for you.

If any of these factors are a concern then be sure to raise them in the consultation with your equity release advisor or broker.

Knowing what your financial goals are will help them find a provider and plan that best aligns with your circumstances.

What Does Martin Lewis Say About the Pros & Cons of Equity Release?

Martin Lewis highlights that while equity release offers a way to access the wealth tied up in your home without moving, it's not suitable for everyone.

He points out the importance of considering the compound interest effect, which can significantly reduce the estate's value over time.

Lewis advises thorough consultation with a financial adviser to understand fully how equity release might affect your long-term financial health and inheritance plans.

Common Questions About Equity Release in 2025

Conclusion: Working Out If Equity Release Is Right For You

Equity release can be a valuable tool for unlocking the value of your home, but it requires careful consideration and planning. 

By understanding the benefits and drawbacks, seeking independent advice, and exploring all alternatives, you can make an informed decision that aligns with your financial goals and needs.

Determining whether equity release is a good idea for you may be one of the first steps you take as you start planning for your retirement.

Read More: Equity Release Pitfalls