Increased Demand for Equity Release Soars by 32%, Spurred by Rising Anxiety Regarding Inheritance Taxes
Homeowners extracted a substantial 32% more wealth from their properties during the initial three months of 2025 compared to the same period last year, according to newly released statistics. This surge in housing equity extraction is allegedly an attempt to circumvent impending changes to inheritance tax legislation, experts suggest.
In the first quarter of the year, £665 million worth of housing equity was accessed by customers utilizing equity release, as per the Equity Release Council's (ERC) latest quarterly market report. This figure marks a significant increase from £504 million for the same period in 2024, and continues a streak of uninterrupted equity release market growth.
Growth in the equity release market has been primarily fueled by a substantial rise in new customers securing lump sums – an increase of 14% compared to the previous year, according to ERC. The average amount borrowed by the 47% of homeowners who opted for a lump sum product was £127,414 – a rise of 11% from the previous quarter and 23% from the same quarter in 2024.
With the gradual increase in living costs and pressure on traditional retirement income sources, equity release is emerging as an attractive option for many homeowners seeking financial stability and achievement of their aspirations in their later years.
Experts attribute the escalating number of transactions to a response to measures announced in the Autumn Budget, which will eventually include pension wealth in inheritance tax calculations. Considering the continued rise in house prices, it is predicted that once both property wealth and pension wealth are factored into calculations, a significant number of families will be required to pay inheritance tax at 40% upon inheritance.
David Forsdyke, head of later life finance at Knight Frank Finance, notes that the fastest-growing segment of the market is among affluent homeowners with ample income but inheritance tax concerns. These individuals are utilizing equity release to move funds into more tax-efficient investments, such as those benefiting their beneficiaries.
Sadna Zaman, proposition development manager at Canada Life Home Finance, which provides equity release, concurs, stating: "Evolving financial planning considerations, including forthcoming changes to inheritance tax, may be driving more homeowners to consider equity release as a strategic choice."
It is worth noting that equity release can lead to potential risks such as the accumulation of debt and the reduction of housing wealth that may be passed on to loved ones upon death. Homeowners are advised to seek financial advice from a Financial Conduct Authority (FCA) regulated equity release adviser before making their decision.
Pros of equity release include the provision of a tax-free cash sum, the option to access property wealth without selling one's home, potentially no ongoing monthly repayments, the possibility of ring-fencing a portion of one's home's value for beneficiaries, and less onerous affordability assessments compared to standard mortgages.
However, equity release is a form of loan on which interest is payable, which can accumulate significantly over time, leaving less for loved ones to inherit. The maximum percentage of equity one can release typically ranges between 20% and 60% of one's home's value. One may receive a lower market value for the portion of equity released, and the lump sum received from equity release may affect one's eligibility for certain means-tested benefits. Furthermore, equity release can complicate remortgaging or moving home, and early repayment charges may apply if one repays the equity release loan prematurely.
- As a result of the projected changes in inheritance tax legislation, some homeowners are considering wealth-management strategies such as investing in tax-efficient financial products, like those involving equity release.
- Amidst the hiking costs of living and uncertain retirement income sources, real-estate and personal-finance experts foresee a trend of homeowners increasingly turning to equity release as a means to secure their wealth and fulfill their aspirations post-retirement.
- In the face of forthcoming alterations to inheritance tax rules, the housing-market data indicates a rise in the number of homeowners exploiting equity release to consolidate their wealth, diversify their investments, and manage their inheritance responsibilities more effectively.
- Considering the benefits and risks of equity release, homeowners who wish to explore this option for wealth management would be wise to seek guidance from Financial Conduct Authority (FCA) regulated advisers to understand the potential implications on their personal financial situation and the wellbeing of their beneficiaries.
