More homeowners than ever are using equity release to pass some of the almost £4 trillion over 55s hold in property wealth onto the next generation, according to new research.

Equity release allows older people to access the wealth in their homes, in the form of a loan against their property’s value, without needing to sell or move.

A shift has occurred in the reasons why homeowners are choosing equity release, with a record number doing so for intergenerational gifting – one way to potentially avoid inheritance tax – according to 2025’s full year data from Canada Life, which provides equity release loans.

Last year almost a fifth (19%) of those using equity release did so to gift money to family members. This is up 3% on the previous year, and the highest figure recorded in a decade of Canada Life’s customer data.

This upward trend points to the increasing significance of intergenerational support, as older homeowners look to help children and grandchildren with financial milestones such as house deposits and education fees.

Sadna Zaman, home finance proposition manager at Canada Life, said: “More customers are incorporating equity release into their estate planning strategies, using property wealth to pass assets to the next generation in a timely and tax-efficient way.

”This is enabling families to support loved ones with major milestones, such as home purchases or education, while also potentially reducing inheritance tax liabilities.”

How much UK property wealth do over 55s have?

Property owners in the UK aged 55 and over held a total of £3.7 trillion in property wealth in the period April 2020 to March 2022, according to Office for National Statistics data.

This represents 68% of the nation’s total housing wealth – defined as the value of all properties minus mortgage debt.

Equity release is only available to certain homeowners typically aged 55 and over.

The 55 to 64 age group owns the greatest amount of private property wealth with a total value of £1.4 trillion, a quarter of the nation’s private housing wealth. The cohort aged 65 to 74 holds £1.2 trillion (23%) and those aged over 75 hold £1.1 trillion (20%).

Stephen Lowe, group communications director at retirement firm Just Group, said: “The sheer scale of property wealth held by older people enables them to plug into the powerhouse of financial resources held in their homes to meet a range of needs in later life – from topping up their own income in retirement to helping family.”

He added: “The continued freeze on inheritance tax thresholds is likely to tip more estates into paying the tax but using property wealth to make living inheritances could provide homeowners with a means of mitigating the impact of inheritance tax and provide loved ones with extra financial support.”

Reasons over-55s use equity release

Home adaptations or improvements emerged as the leading reason for using equity release in 2025, with 43% of applicants citing this when applying – a substantial 10% uplift on the previous year, according to the Canada Life data.

Whilst clearing an existing mortgage remained a key motivation, 2025 marked the first year where it was no longer the leading reason for taking out equity release, dropping from 36% in 2024 to 27% in 2025.

The data also highlighted a marked increase in the number of people using equity release to establish an emergency savings fund – from 8% in 2024 to 21% in 2025.

The rise points to heightened financial caution, with more customers prioritising a safety net against unexpected expenses, possibly in response to economic uncertainty or personal health concerns.

Zaman from Canada Life said: “The range of uses for equity release underscores the importance of tailored, expert advice. Equity release may not be the solution for everyone, but advisers play a vital role in helping customers make informed, confident decisions about their financial futures in later life.”

How popular is equity release?

Equity release is increasingly popular. The equity release market grew 11% in 2025, according to the latest data from the Equity Release Council.

Total annual lending increased from £2.3 billion in 2024, to £2.57 billion in 2025. The Council’s market data is compiled from actual whole-of-market returns, making it the UK’s definitive equity release data.

Lifetime mortgages make up more than 99% of the market. These mortgages let people borrow against their homes without making repayments unless they choose to. The loan and interest is paid when the customer dies or goes into long term care.

However while equity release is becoming more popular, it is not without its downsides. Before arranging your application, a regulated equity release adviser must explain all the risks of equity release.

These include the fact the cost of borrowing will eat into the remaining equity in your home if you choose not to make any repayments on your equity release loan. Also expensive early repayment charges will apply if you pay off the equity release loan earlier than the terms of the contract allow, which can be up to 15 years.

Many Brits are carrying debt into their mid-life years and are increasingly considering equity release as a way to deal with being asset rich and cash poor, according to latest research.

Nearly half (45%) of those aged over 50 are still managing debt, SunLife’s Life Well Spent 2025 report found, with the financial pressure being felt most in London and the South East.

The amount overall they have left to pay off averages £23,799 – rising to an average of £33,590 for homeowners over 50.

More than one in 10 (13%) homeowners over 50 are considering equity release as a way to clear these debts.

Equity release lets you access money tied up in your home by taking out a loan against the remaining property equity. The process is on the rise, according to separate data from the Equity Release Council, showing the amount of money being withdrawn via equity release has jumped 4% year-on-year.

The 2025 SunLife report finds those who released equity unlocked an average of £69,982, with 36% using the funds to pay off debts and 44% to improve their homes. Three-quarters (76%) said these moves to boost their finances made them happier.

Mark Screeon, chief executive at SunLife, said: “Many over 50s have worked hard for decades yet still find themselves with some debt. The rising cost of living and ongoing financial commitments can make it hard to enjoy the retirement they’ve planned.

“For some homeowners, equity release could offer a practical and empowering way to unlock some of the money tied up in their property to pay off debts, support family or simply live more comfortably.”

How much debt do over 50s have?

Mortgage debt remains the biggest burden. Higher interest rates leading to increased mortgage rates mean many find themselves paying off their homes well into retirement.

Over 50s have an average balance of £67,538 left on their mortgage and monthly repayments of £842, the report found.

As well as this, almost one in three (30%) over 50s have credit card debt (which amounts to £3,922 on average), one in 10 hold personal loans (£5,793), and a further 8% have overdrafts (£1,575).

One of the biggest expenses outside the mortgage is rising car finance costs – which 6% of over 50s are juggling – that now average £11,375 per borrower (£1,393 more than last year’s average).

Pros and cons of equity release

Equity release can provide those aged over 55 with a route to clear long-standing debts, supplement income or support family, all while remaining in the home they love.

But it also carries potential risks like the possibility of accumulating debt, and will reduce the amount of housing wealth that can be passed on to loved ones on death.

The most popular form of equity release, a lifetime mortgage, is technically a loan, but usually requires no repayments until you pass away or move into long-term care. However, making ad hoc or regular repayments may be recommended to keep the cost of borrowing down, where affordable.

On average, homeowners who’d consider equity release have stated they would look to unlock around £81,000, most often to clear debts, boost income or help loved ones financially, the Sun Life report found.

Others would use the funds for home improvements or long-awaited life experiences such as travel and hobbies.

It’s important to take financial advice from an FCA-regulated equity release adviser before opting for equity release.

Pros of equity release:

• Can provide a lump sum of tax-free cash for any purpose
• Allows homeowners to access their property wealth without having to sell their home
• In some cases there are no ongoing monthly repayments required
• It’s possible to ringfence a portion of your home’s value for your beneficiaries, so they can inherit it
• Affordability assessments are typically less onerous than standard mortgages
• Provides the option to gift money before death reduce the value of your estate for inheritance tax purposes

Cons of equity release:

• Equity release is a type of loan and interest is payable on the debt, which can build up significantly over the years leaving less housing wealth for your loved ones to inherit
• The maximum percentage of equity you can release typically ranges from 20% to 60% of your home’s value
• You may get less than market value for the portion of equity you release in your home
• The lump sum received from equity release can affect eligibility for certain means-tested benefits
• It can be difficult to remortgage or move home once you have opted for equity release
• Early repayment charges can apply if you repay the equity release loan sooner than expected

Homeowners extracted 32% more wealth from their properties in the first three months of 2025 than they did last year, according to new figures, with experts suggesting they are trying to avoid looming changes to inheritance tax rules.

A total of £665 million worth of housing equity was accessed by customers using equity release In the first quarter of this year, according to the Equity Release Council’s (ERC) latest quarterly market report.

This is up from £504 million for the same period a year ago, and is the fourth successive quarter of growth in equity release.

Equity release is a type of mortgage. It is a way for homeowners aged over 55 to unlock some of the equity they have built up in their homes over the years of paying their original mortgage.

They gain access to cash – as a lump sum or regular payments – without having to move home, in the form of a loan from an equity release company, which is typically repaid when the homeowners die or move into a care home and their property is sold.

Growth in the equity release market has been driven by a significant increase in new customers taking lump sums, up 14% compared to a year ago, according to the ERC.

The average amount borrowed by the 47% of homeowners who chose a lump sum product was £127,414. This is up 11% on the previous quarter and up 23% on the same time last year.

We look at what to consider when choosing between downsizing or equity release in a separate guide.

Can you use equity releases to avoid inheritance tax?

Experts have suggested the increase could be in response to measures announced in the Autumn Budget, which will see pension wealth included in inheritance tax calculations from 2027.

After decades of rising house prices, it is expected that once both property wealth and pension wealth is taken into account, thousands more families will be required to pay inheritance tax at 40% when they inherit.

David Forsdyke, head of later life finance at Knight Frank Finance, says: "Among the fastest growing parts of the market is among wealthy homeowners with sufficient levels of income but concerns about inheritance tax.

“They are raising funds through equity release to move funds into more IHT tax efficient investments, perhaps through their beneficiaries."

Sadna Zaman, proposition development manager at Canada Life Home Finance, which provides equity release, agrees: “Evolving financial planning considerations, such as forthcoming changes to inheritance tax, may be prompting more homeowners to consider equity release as a strategic option,” she says.

How homeowners may use equity release to unlock housing wealth to fund their lifestyle

For some homeowners, the appeal of equity release may be more to deal with rising costs, and the struggle to stretch pensions for decades as life expectancy increases.

Zaman says: “With more people living longer and traditional retirement income sources under pressure, it’s clear that many homeowners are proactively exploring property wealth as a valuable tool to achieve financial stability and aspirations in later life.”

Maturing interest-only mortgages may be another prompt to use equity release to clear outstanding housing debt.

Richard Pike, chief sales and marketing officer at financial software company Phoebus, says: “Four consecutive quarters of growth and a notable rise in average loan sizes suggest homeowners are increasingly turning to equity release to navigate financial challenges, repay mortgages, or fund lifestyle changes.

“With many older homeowners still navigating high living costs and interest-only mortgage maturities, tapping into property wealth is no longer a last resort – it’s becoming a strategic choice.”

Pros and cons of equity release

Equity release allows homeowners aged over-55 to access a tax-free cash sum from their home's equity without having to move. But it also carries potential risks like the possibility of accumulating debt, and will reduce the amount of housing wealth that can be passed on to loved ones on death.

It’s important to take financial advice from an FCA-regulated equity release adviser before opting for equity release.

Pros of equity release:

• Can provide a lump sum of tax-free cash for any purpose
• Allows homeowners to access their property wealth without having to sell their home
• In some cases there are no ongoing monthly repayments required
• It’s possible to ringfence a portion of your home's value for your beneficiaries, so they can inherit it
• Affordability assessments are typically less onerous than standard mortgages
• Provides the option to gift money before death reduce the value of your estate for IHT purposes.

Cons of equity release:

• Equity release is a type of loan and interest is payable on the debt, which can build up significantly over the years leaving less for your loved ones to inherit
• The maximum percentage of equity you can release typically ranges from 20% to 60% of your home's value
• You may get less than market value for the portion of equity you release in your home
• The lump sum received from equity release can affect eligibility for certain means-tested benefits
• It can be difficult to remortgage or move home once you have opted for equity release
• Early repayment charges can apply if you repay the equity release loan sooner than expected.

Increasing numbers of older homeowners are accessing equity release products to support their later-life needs and even bypass NHS waiting lists.

Higher interest rates and slowing house price growth had reduced the attractiveness of equity release in recent years but the latest industry data suggests consumers have been returning to the product in recent months, especially as the cost of retirement soars.

Figures from UK Finance show in the first three months of 2025, there were 5,620 new lifetime mortgages – the most popular type of equity release product – a rise of 11% in a year. The value of this lending was £530 million, which was up 39.5% compared with the same quarter a year previously.

The market for retirement interest-only mortgages is smaller – at 339, up 19% in a year. The value of this lending was £33 million, up 17.9% versus the same quarter a year previously.

There were also 38,510 new loans advanced to borrowers aged over 55 in Q1 2025. This is up 34% year on year. And at £6.1 billion, the value of this lending was up 42.6% compared with the same quarter a year previously.

Jim Boyd, CEO of the Equity Release Council, commented on the UK Finance Later Life Lending Statistics: “The market is moving swiftly from niche to mainstream with increasing numbers of older customers relying on advisers to help them navigate their various options which include equity release, retirement interest-only mortgages and later life mortgages.

“However, while the rise in equity release borrowing echoes the Council’s own Q1 figures, there is certainly scope for more growth as half (51%) of UK households are expected to need to use housing wealth to support their spending needs in retirement.”

What are people using equity release for?

Equity release lets homeowners over age 55 access the cash locked up in the property typically through a lifetime mortgage.

Borrowers can take a lump sum and then reserve the rest to access at a later date so they only owe interest on what they drawdown.

Sarah Coles, head of personal finance, Hargreaves Lansdown, said: “Lifetime mortgages still dominate the landscape – making up by far the majority of equity release deals. These allow people to borrow against their home, then the interest rolls up, to be repaid when the property is sold – along with the loan itself.

“However, we’re also seeing some growth in retirement interest-only mortgages, in which the interest is paid as you go along, so only the initial loan is repaid when you sell up or pass away.

“They’re both an option for those with plenty of property equity and shortfalls elsewhere. Lifetime mortgages can work for some people who can’t meet everyday living costs from their pension, while retirement interest-only mortgages can provide a one-off injection of cash for a specific reason – such as home improvements or healthcare,” she said.

The product appears to be filling gaps in access to healthcare amid reduced NHS services and long waiting lists.

“Due to NHS delays as a result of the pandemic, we've also seen people turning to equity release to fund hip or knee replacements,” says Scott Gallacher, director at financial advisory firm Rowley Turton.

“There's little point having capital tied up in your home but being unable to enjoy your retirement due to a dodgy hip or knee.”

He has also seen people use the product to fund solar panels so they can reduce their energy bills.

The risks of equity release

Equity release is a useful product if you are looking to access finance later in life and don’t fit a traditional lender’s requirements.

The industry has faced criticism in recent years though due to high fees and unclear product terms, but it has tried to improve its image with more flexible and transparent products.

Lifetime mortgages are priced higher than standard mortgage rates at between 7% and 8% compared with around 5% for a traditional home loan.

The main risks are leaving your loved ones with a bill once you pass away or move into care– usually meaning the family home has to be sold – and ultimately limiting the inheritance you can leave.

Some modern-day equity release products let borrowers make repayments and you can usually reserve a portion of the proceeds of the property sale to leave as an inheritance, which as Turton points out is “more of a concern for your children than you".

Equity release shouldn’t be entered into without fully understanding the implications for you and your family.

Coles said: “There are some hefty fees, and the interest is higher than on a standard mortgage. With a lifetime mortgage, this will all roll up and need to be repaid after you die, so the longer you borrow for, the more it will cost. Compounding is working against you, so over a ten-year period, the amount payable on the loan can easily double."

Equity release also can stop you from downsizing later if you change your mind, she pointed out: "Sometimes the debt has eaten so far into the equity in your home that if you were to sell up and repay the loan, you wouldn’t be able to afford a smaller place.”

She added: “Retirement interest-only mortgages, meanwhile, run the risk of raising your outgoings, which can mean you end up building up problems for later, once you’ve spent the money borrowed against your home. You need to be aware of exactly how much it will cost each month, and how you will afford it.

“For many people it could be a last resort option, later in life. If you can’t sell your home and need to pay for care, it could be something to consider. However, even then it’s worth talking to your family first and considering whether you’d be better off downsizing to free up the money.”

Equity release rates are starting to drop from their record highs, giving older homeowners more options if they are looking to release cash locked up in their property.

The appeal of equity release has dampened in recent months as rates rise and house prices fall.

But data from the Equity Release Council shows the third quarter was the busiest period of the year so far for lending, with homeowners unlocking £716m of property wealth, up 8% annually.

This has been boosted by falling lifetime mortgage rates.

Moneyfacts data shows the average rate on a lifetime mortgage has fallen from 7.33% at the start of November to 7.18%.That compares with a record high of 8.13% last year.

Borrowers are also benefiting from more choice, with the number of deals at 312 compared with 179 in January.

Most borrowers are choosing drawdown over a lump sum withdrawal, according to the ERC.

This provides more flexibility as you only take the money you need and reduce the amount of interest that is rolled up.

Is equity release worth it?

Equity release has always been more expensive than a standard mortgage but many older homeowners may not have had a choice if they wanted to access cash to boost their retirement and didn’t meet a bank’s affordability or maximum lending criteria.

The differences in rates became more stark over the past year as mainstream mortgages rose above 6% on average but equity release rates rose above 8%, deterring many.

A calmer market and slowing inflation has seen the equity release market benefit from a drop in rates.

David Burrowes, chair of the ERC, says the market is recovering from high interest rates but suggests “pent-up demand” is likely to emerge as the interest rate cycle begins to turn.

Several lenders have cut rates since the start of November which is helping bring pricing down, Moneyfacts said.

But there are risks to consider such as high fees and the impact it may have on any inheritance you want to leave behind.

“A lifetime mortgage could be an option for borrowers to use some wealth from their home to support their retirement plans or help towards the cost of living,” says Rachel Springall, finance expert at Moneyfactscompare.co.uk. 

“Borrowers who are considering an equity release plan would be wise to seek independent financial advice to navigate the abundance of deals and choose the right one that suits their circumstances. Lifetime mortgages have several important factors to consider, such as associated fees, drawdown and, of course, the impact on passing inheritance to family members. 

“Hopefully, we will see continued resilience in the market and more rate cuts as the year-end approaches for those looking to take out a lifetime mortgage.”

More than 40,000 people took out equity-release plans last year, cashing in on almost £4bn of value locked up in their homes. The figures, just published by the Equity Release Council, underline the ongoing popularity of equity-release plans with older people looking to supplement their income in retirement, or to find a cash sum for purposes such as paying off debt or a home refurbishment.

Financial advisers have traditionally been sceptical about equity release, pointing out that the plans are often expensive, and that they reduce the size of any inheritance left over for children. But while selling up and downsizing is still likely to be a more economic route to unlocking value from your home, assuming it is practical, fierce competition in the equity-release market is paying off for potential customers.

Most equity-release plans are lifetime mortgages; you get a cash lump sum by taking out a loan against the value of your home. Importantly, this loan does not have to be repaid during your lifetime. Instead, the mortgage, plus interest, is typically repaid from the sale of your home following your death.

Beware compound interest

The problem with this model is that the laws of compound interest mean the debt incurred will roll up quickly. While equity-release providers typically guarantee that the mortgage debt will never rise above the value of your home, the amount to be repaid can balloon, with interest racking up on previous interest charges as well as on the capital borrowed. Once the loan is finally repaid, there may be little left over from the sale proceeds. Still, the good news is that interest rates on equity-release plans have never been lower. The market-leading deals now cost less than 2.5% a year. At that rate, a borrower taking out a £50,000 advance at age 65 would owe £64,184 by age 75 – and £93,352 by age 90. That’s quite a chunk of interest to be repaid, but an interest rate of 3.5% would result in a £119,791 debt for the same 90 year-old’s estate.

Monthly payments

Innovation in the equity-release market also offers comfort. Some providers allow you to pay interest charges as they come up each month, which keeps the size of the debt in check. Another option is to draw down money in chunks as you need it, rather than in one upfront sum. This will reduce the interest you owe. Alternatively, consider an equity-release plan that allows early repayment. This might appeal to homeowners who need cash now but expect to receive an inheritance of their own in a few years’ time.

The combination of reduced cost and greater flexibility means that equity release has become a more attractive option for older homeowners caught in the trap of being asset-rich but cash-poor. The plans still have downsides – and you should definitely take independent financial advice from a specialist in equity release before committing – but do not rule them out.

Equity-release specialists report a surge in demand from homeowners in their sixties forced to stop work earlier than expected or concerned about the impact of Covid-19 on their finances. More people than ever before are turning to their homes to bolster their income. For the cash-strapped, equity release has never looked more appealing. Not only have house prices hit record highs, but interest rates are also historically low. The most competitive equity-release plans now carry annual rates of less than 2.5%.

But even at these lower rates, the cost of equity-release plans builds up over time, potentially leaving borrowers with little or no property wealth to pass on to children. The younger the borrower when they take out the equity-release plan, the higher the costs are likely to be.

Plan providers usually require homeowners to be at least 55 before they will lend to them.

In the past, however, the average borrower has typically been significantly older – often in their seventies – which makes the product more affordable.

This reflects the nature of the product. Most equity-release plans are mortgages secured against your home, but with no repayments due while you remain in the property. Instead, interest rolls up over time and is repayable, along with the capital borrowed, when you finally move out of the property, or on your death.

How the payments spiral

This structure appeals to homeowners who need to convert the capital in their homes into income. The mortgage can be drawn down over time or invested to generate an income – without having to worry about repayments. But with interest charges subject to additional interest, the total amount owed can spiral rapidly.

A 75-year-old homeowner releasing £60,000 of capital from a home worth £300,000 would owe around £77,000 by age 85, assuming an interest rate of 2.5% on the plan. Someone taking out the same plan at age 65 would owe almost £99,000 by the time they reached age 85.

However, today’s equity-release plans are more flexible. For example, drawing down cash as you need it, rather than in one lump sum, can keep costs down as you only pay interest on the money you have taken out of the scheme. You may also have the option of paying interest charges as you go along, cutting the total cost.

Still, financial advisers describe equity-release plans as a last resort for older people worried about their income. For many people, it may make more sense to downsize, freeing up cash by moving to a smaller property. It is crucial to take high-quality independent financial advice before opting for an equity-release plan.

Britain’s equity-release market is expected to be worth more than £5bn this year: the number of people unlocking some of the value of their home in retirement continues to grow at rates of more than 20% a year. But while this growth is understandable, with many people owning valuable properties by the time they retire but finding themselves short of disposable wealth, is equity release really the answer? Downsizing may be a better option.

The allure of equity release is obvious. If you own an expensive property outright but need more money for everyday living expenses or home improvements, travel or helping out children, an equity-release plan offers real benefits. You borrow money against the value of your house or, with some plans, sell a chunk of it. There are no repayments to make until after your death or you’ve moved into some form of care and the money is yours to spend how you wish. And you can stay in your own home.

Watch out for high rates

However, there are substantial downsides. While the equity-release plan market is more competitive than in the past, the cost of products is still high compared with a conventional mortgage. The average borrower pays an interest rate of 4.55%, at least twice what you’d pay for a conventional home loan. Moreover, as there is nothing to pay during your lifetime, your debt mounts up quickly due to the law of compound interest. There may be little or nothing to pass on to your heirs once the money is repaid on your death.

Another problem is that equity-release products can be constraining, particularly if your plans change. It may be difficult to move house, with extra charges to pay. You may struggle to make repayments during your lifetime, even if you want to reduce your debt. Home-reversion plans, where you sell a chunk of your house rather than borrowing, are problematic too, since your property will effectively be valued at well below market value, reflecting the time that the equity-release provider has to wait to earn a return.

Downsizing, by contrast, carries none of these headaches. You simply sell your current property and buy a cheaper one, with the difference in value freeing up cash you use as you see fit. Your new house can be left to your heirs and there is no financial-product small print to worry about.

For many older people, selling a large family home in order to move into a more modest property also has practical benefits. Smaller houses are easier and cheaper to maintain.

Nonetheless, downsizing isn’t right for everyone. If you don’t have a large property, moving to a smaller one may simply not be an option. The practicalities will also depend on the dynamics of your local housing market. How much can you sell for and what will a smaller property cost? And some people do not want the emotional wrench of leaving a much-loved family home.

Downsizing also carries costs. You’ll incur all the costs of moving house, including estate agents’ fees, solicitors’ costs and the removals firm’s charges. Plus you may have to pay stamp duty on the purchase price of a new house, though stamp-duty rates are lower on cheaper properties (and zero on purchases below £125,000).

The cheaper option

Nevertheless, for most people, the total cost of downsizing is likely to be significantly lower than what your family effectively ends up paying through an equity-release product. The costs of moving house just do not compare to the cost of interest charges on a large loan rolled up over time.

In financial terms at least, downsizing is a better option than equity release for most people. If you’re willing and able to consider it, this should be the first thing you consider if you’re seeking to raise cash later in life.

If you’d like to find out how much equity you could release from your home, or to find out more about equity release in general, visit our partners, UK Experts Online, for a free report.

The equity release market is booming. Living longer but struggling to save for retirement or running short of money after taking too much out of pensions too early mean more people than ever want to cash in on the value of their house in later life. Equity-release plan providers lent £3.94bn last year, says the Equity Release Council, up 29% on 2017. The size of the market has doubled within a four-year period.

Equity release plans are deceptively simple. Over-55s can borrow against the value of their property typically up to 50% to generate a pot of cash. You can use this money as you like and there are no repayments due. The loan, plus interest, is repaid after your death from the proceeds of the sale of your house, or earlier if you need to sell to move into long-term care.

Equity release can be an attractive proposition for homeowners in need of cash and sitting on a valuable asset, particularly those who are unable or unwilling to free up capital by downsizing to a smaller property. However, there are some big downsides. In particular, equity release plans can prove very expensive.

In part this is because lenders' rates are not as competitive as on standard mortgages, typically priced at 5%-6% a year, according to personal finance data provider Moneyfacts. But the key problem is that since you're not making any repayments, the charges mount up, exposing you to the perils of compound interest. Borrow £50,000 at the age of 60 at rate of 5.1% and what you owe doubles roughly every 14 years.

So any inheritance you were hoping to leave to children can be wiped out. Equity Release Council members all guarantee no negative equity your debt will never be greater than the value of your property but your heirs may get nothing.

If you’d like to find out how much equity you could release from your home, or to find out more about equity release in general, visit our partners, UK Experts Online, for a free report.

The charity, Age UK, does all sorts of good work. It provides a wealth of information and advice, and generallytries to make life better for the elderly.But apparently it also makes moneyby directing you to an equity-releaseadvice service, Hub Financial, which is weighted towards products offered by Hub's own parent company, Just, saysThe Daily Telegraph.

Note that when people are sent to the advice service, they go through Age UK's commercial arm, Age Co. This was formed in the wake of criticism from the Charity Commission in 2016, which pointed out that the charity was channelling people towards an energy tariff that wasn't the cheapest option in the market; it emerged that it had formed a partnership with provider E.ON. While this separation seems right and necessary, it's doubtful whether many people would draw the distinction between a charity and a commercialbody whose websites have verysimilar branding.

As far as the equity-release arrangement is concerned, when someone takes out an equity-release loan (borrows money against their property), Age Co gets up to 0.75% of the value of that loan. Although Hub discloses that it only compares deals from five companies, "the way its advice process is structured means that in most cases a customer will be offered a deal by just one panel member Just", says Adam Williams in The Daily Telegraph. "Hub's staff follow a methodology that prompts them to offer Just for the most common consumer needs."

The story, while also casting Age UK in a rather unfortunate light, underlines the importance of making sure that you get the right equity-release product for you. As we've discussed in MoneyWeek many times over the past decade, equity release used to have a terrible reputation for ripping people off, and not without reason. Many people took out loans where the interest payments were rolled up to be paid off at the end. If the loan ended up being worth more than the value of the property associated with it, people's heirs found themselves saddled with massive debts to repay.

Thankfully, the industry has cleaned up its act in recent years, largely because it is now regulated by the Financial Conduct Authority. And it has become increasingly popular. Equity-release loans worth a record £935m were taken out in the first three months of this year, up 8% on 2018, according to the Equity Release Council. If you're considering equity release, make sure you're as well-informed as possible before signing up. You will have to take financial advice on the decision, and must use a specialist broker when choosing a product. Ensure you factor in the combined cost of this advice, legal services and the required property valuation. Depending on the type of plan, expect to pay between £1,500 and £3,000 in arrangement fees, warns the Money Advice Service.

Watch out for plans that include hefty exit fees, which fall due if you want to pay back the loan early. If you think you might move in future, you will probably want a product that allows you to "port" your loan to another property. You should also consider potential complications, such as whether the money you receive will affect your benefit entitlements. Finally, note that reputable providers will offer a no-negative equity guarantee, which means you or your estate should never have to pay back more than the value of your property.

If you’d like to find out how much equity you could release from your home, or to find out more about equity release in general, visit our partners UK Experts Online, for a free report.

It has been 12 months since retirement interest-only mortgages went mainstream. These mortgages can be a good alternative to equity release for older borrowers, but they have previously received little publicity, with lenders slow to make products available.

An retirement interest-only mortgage differs from a standard interest-only mortgage in that there isn't a set end date for the loan. It only has to be repaid when you sell your property, die or go into long-term care. The affordability calculations also only look at whether you can afford to repay the interest on the loan, not the capital, as that will be paid back when the property is sold.

Many people are not aware of retirement interest-only (RIO) mortgages as in the past they have been lumped in with equity release products. However, last year, the Financial Conduct Authority the City regulator reclassified RIO mortgages as standard mortgages, so that mainstream lenders could start offering them.

It was a good move as retirement interest-only mortgages are quite different to equity release. With the latter, you take out a lifetime mortgage on your home. You don't have to repay the loan until you die or the house is sold, and importantly, you also don't have to make monthly interest repayments. Sounds great, but in reality, this comes with a massive sting in the tail. Because you aren't making any repayments, the interest is rolled up and added to the amount that the equity release firm takes when your home is eventually sold. That interest quickly mounts up. For example, a £100,000 equity release loan at 5% interest would mean you owed £211,370 after 15 years, assuming interest is compounded monthly.

By contrast, with an RIO mortgage, you repay the interest every month, so it never compounds. On the above loan, you would repay £416 a month and after 15 years still owe the initial £100,000. In total you would have paid £74,880 in interest repayments, far less than would be owed with equity release.

The drawback to RIO mortgages is the interest rate. While they are competitive against equity-release products, standard mortgages are far cheaper. For example, Leeds Building Society has launched a ten-year fixed rate ROI at 3.99%. TSB has a standard ten-year fix at 2.29%, but it won't lend beyond your 75th birthday. So, you may want to leave the RIO mortgage until standard mortgages are no longer an option.

If you’d like to find out how much equity you could release from your home, or to find out more about equity release in general, visit our partners, UK Experts Online, for a free report.

A more competitive market means you could save by switching provider.

For cash-poor retirees who own their own home, equity-release plans have long offered a means to gain capital later in life. And with more people now taking out such plans, the market is increasingly competitive.As a result, if you took out an equity-release plan a few years ago, you may now be able to switch to a much better deal.

Equity-release plans enable older homeowners to unlock some of the value tied up in their properties while staying in the home. The money advanced is repaid, with interest, from the proceeds of the sale of the house when they die or move into long-term care. Traditionally, providers have charged expensive rates compared with standard mortgage deals.

Moreover, with interest accumulating over the lifetime of the loan, the final repayment cost can be very high. Most providers offer a no-negative-equity guarantee, so the sale of the property will always cover what is owed, but there may be little left over.

The lower the interest rate you pay, the less chance there is of that happening. The good news is that rates have come down as the market has grown: the number of products available went from 58 in 2016 to 139 in 2018, according to the Equity Release Council, a trade body. And while the average loan now costs 5.22% a year, down from 5.96%, the most competitive products cost less than 3.5%.

When it pays to switch

For those who took out equity-release plans at a time when rates were less competitive, the potential savings from switching are therefore compelling.

If you currently owe £100,000 and you are paying a pretty typical interest rate of 6% a year, the debt will have grown to around £182,000 in ten years' time; if you can move to a rate of, say, 3.5%, your debt in ten years' time would be only £142,000. Unfortunately, for most people, the calculation will not be quite so straightforward. Note that the Financial Conduct Authority, the City regulator, requires equity-release customers to take independent financial advice before signing up for any new product. This is likely to cost you between 1.5% and 2% of the transaction value. Finally, there is a very good chance your existing equity-release plan has early repayment charges, which you'll need to take into account.

Still, even assuming additional costs of £5,000 in the above example, covering the price of advice and exit fees, it would be less than three years before your switch paid off. It's worth thinking about.

If you’d like to find out how much equity you could release from your home, or to find out more about equity release in general, visit our partners, UK Experts Online, for a free report.

It's becoming increasingly popular to release cash from your home, but it's still a risky move.

Almost 40,000 households used equity-release products in the first half of 2018, according to figures from the Equity Release Council (ERC), an industry body. This included 21,490 new plans, an increase of 28% from 16,805 in the same period last year.

This growth has apparently been driven by product innovation and increased flexibility, reckons the ERC, with the number of equity-release products on the market more than doubling in the past two years. (Presumably the increase in how much people's houses are worth has fuelled uptake too.) Yet despite its apparent popularity, using your home as a cash machine to fund your retirement or help your kids buy a house can be a risky move.

Equity release allows homeowners to access capital held in their homes, normally through products like a lifetime mortgage or home-reversion scheme. A lifetime mortgage involves borrowing money secured against your home, while retaining ownership. You pay interest onthe amount borrowed generally this is added on to the total, pushing up the amount you owe, though some plans let you repay as you go.

When you die or move into long-term care, the home is sold, and the money from the sale used to pay off the loan. With a home-reversion scheme, you sell all or part of your home in return for a cash lump sum, a regular income, or both.You can then live in the home until you die.

While the majority of equity-release providers are insurers or specialist companies, there are a couple of household names dipping their toes into the market, too. Building society Nationwide became the first high street name to enter the market at the end of 2017, while insurer Saga has recently launched a product which allows customers to take monthly tax-free payments from their property.

Saga's regular-drawdown lifetime mortgage is available to people aged 60to 80, in contrast to the majority of products that offer lump-sum payments. Borrowers must take an initial sum of £10,000, to be followed by at least £200 a month for a minimum of five years. Customers can review their plan each year and change the value of monthly payments or release further lump sums.

If you’d like to find out how much equity you could release from your home, or to find out more about equity release in general, visit our partners, UK Experts Online, for a free report.

The idea of using your house as a cash machine with which to fund your retirement has gone mainstream, with the announcement that Nationwide is the first major mortgage lender to offer it.

The building society's new lifetime mortgage allows homeowners aged between 55 and 85 to take out an interest-only loan against their house. You don't make any monthly repayments; instead, the loan is repaid in full when you die and the house is sold, or you sell your house to move into care.

Equity-release products such as this capitalise on the fact that many older people have a lot of money tied up in their house, but don't want to downsize. Over-55s hold as much as £1.8trn-worth of property around the UK, reckons Nationwide. Prior to the building society's entrance to the market, equity-release products were mainly sold by insurers and smaller specialist providers.

But while a lifetime mortgage may sound like a great option for people who are not ready to move out of their family home, it's important to be aware that this kind of borrowing is expensive. That's because although you make no repayments on the loan, interest is added to your debt every month, so the compound interest could leave a large debt to be repaid out of your estate when you die.

The interest rates on equity-release products can be high, "meaning the final amount owing can be huge in some cases, large enough to wipe out any remaining equity in the home," warns Stefanie Garber of Which. Yet despite the fact that equity-release products could mean you give away your house for far less than its market value for instance, borrowing 50% loan-to-value (LTV) but losing the rest in interest charges they continue to gain in popularity.

Nationwide's product will allow you to borrow up to £460,000, but not more than 55% of the value of your house. The interest charged ranges from 3.8% to 4.8%, depending on your LTV. Although you can repay up to 10% of the loan every year, early repayment fees do apply. (Although you may be able to avoid this by downsizing, as it is possible to transfer your mortgage if you move.) If this is something you're considering, make sure to read all the small print attached.

If you’d like to find out how much equity you could release from your home, or to find out more about equity release in general, visit our partners, UK Experts Online, for a free report.