Half of UK homeowners will need to tap housing wealth to pay for retirement

Millions of UK households are expected to need to draw on their housing wealth to pay for their desired lifestyle in retirement, according to a new study – but billions of pounds are waiting for them if they do.

By 2040, more than half (51%) of homeowners aged over 60 could benefit from accessing their housing wealth in retirement through later life lending, also known as equity release.

The potential is huge – a massive £23 billion could be drawn down from housing wealth each year this way, in 2025 prices, analysis by consumer rights organisation Fairer Finance shows.

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It could offer a route out of being asset rich but cash poor for millions of homeowners.

Of those that do access housing wealth, the median total amount taken over their lifetime is estimated to be £140,000, in today’s prices, according to the study.

Based on levels of pensions and savings alone, almost four in ten (38%) future retirees are heading for an income below the Pensions and Lifetime Savings Association’s recommended minimum retirement living standards, according to a 2024 report by Scottish Widows.

Yet, on average people in the UK hold more housing wealth (40%) than pension wealth (35%), the latest data from March 2022 from the Office for National Statistics found, highlighting a major mismatch between resources and retirement funding strategies.

As well as boosting pensions, unlocking housing wealth could help the UK economy by contributing £21 billion of gross value added each year by 2040, Fairer Finance estimates.

Fairer Finance’s report calls for action from the government and the Financial Conduct Authority (FCA) to break down the barriers that prevent older homeowners from accessing the equity in their homes, and to integrate housing wealth into mainstream retirement planning alongside pensions.

James Daley, managing director at Fairer Finance, says: “The combination of smaller pensions, increased longevity and rising care costs threaten to create a perfect storm which will leave millions of people unable to maintain their living standards in later life.

“But with around 75% of the population owning a property as they reach retirement, many people are sitting on – and sleeping in – a significant store of wealth.”

How can I access my housing wealth?

There are currently two key ways individuals can access their housing wealth: downsizing (selling their property and moving to a cheaper one), or later life lending, also known as equity release.

These are not mutually exclusive and some households may end up using both.

Equity release is a type of mortgage that allows homeowners aged 55 or over to access cash from their property's equity without having to move out.

It's achieved through a loan secured against the home, which is usually repaid by selling the property when the borrower (and any spouse) passes away or moves into long-term care.

The most common types of equity release are home reversion or a lifetime mortgage.

Home reversion lets you sell all or a percentage of your home to access the money tied up in it. You can continue to live there rent-free. The loan is only repaid after the property is sold when you die or move into long-term care.

With a lifetime mortgage, a long-term loan is secured against the property, where the borrower receives a lump sum or regular payments. The interest accumulates over time, and the loan is repaid when the homeowner dies or moves into long-term care.

What are the barriers to downsizing?

For those who wish to downsize, there are three key blockers identified in the Fairer Finance report.

Firstly, a lack of suitable retirement housing means that many people are unable to find desirable options in their local area.

Secondly, the costs of downsizing remain high – exacerbated by stamp duty. If the older homeowner does find a suitable property, in England and Northern Ireland, stamp duty must be paid by the buyer on any main residential property costing more than £125,000.

The third key blocker, according to Fairer Finance, is a lack of knowledge among consumers, and a social stigma.

“Using housing wealth to fund later life is not currently part of the retirement conversation and many do not see it as a mainstream option,” says the report.

When consumers interact with MoneyHelper or Pension Wise as they approach

retirement, for example, there is a lack of actionable advice around housing wealth, the report says.

What are the pros and cons of equity release?

Equity release is increasingly popular – homeowners extracted 32% more wealth from their properties in the first three months of 2025 than they did last year.

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.

But opting for equity release is a big decision – it’s important to take financial advice from an FCA-regulated equity release adviser before going ahead.

Pros and cons of equity release

Pros of equity release:

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

Cons of equity release:

• You may get less than market value for the portion of equity you release in your home
• 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
• It can be difficult to remortgage or move home once you have opted for equity release
• The lump sum received from equity release can affect eligibility for certain means-tested benefits
• Early repayment charges can apply if you repay the equity release loan sooner than expected

Jim Boyd, chief executive of the Equity Release Council, which commissioned the report, says: “We know younger homeowners are interested in using money in their homes in later life to meet a range of financial needs as generous final salary pensions all but disappear.

“Today’s report challenges us to develop a system that treats housing wealth as a core part of retirement planning, removes regulatory barriers and gives people the confidence to use it wisely.”