Equity release market grows by 11%. Should you unlock property wealth to fund your retirement?

Equity release – the process of releasing wealth from your home – is growing in popularity as more people use it to help fund their retirement or transfer a portion of their estate to loved ones.

According to MoneyAge, the equity release market grew by 11% in 2025. The research also examined how people were using the funds they released from their homes. The results showed:

26% were using it to clear mortgage balances
21% spent it on home improvements
6% used the money for holidays
4% bought a car
13% gifted wealth to their family.

In some cases, equity release might support your wider financial goals. However, there are potential challenges to consider. As such, it’s important to understand how equity release works and consider the pros and cons to determine whether it’s suitable for your needs.

Read on to learn more.

Equity release allows you to free up the value in your home

As property prices rise, you may have a significant amount of wealth tied up in your house, especially if you’ve cleared the mortgage.

Unlocking some or all of that wealth could make it easier to fund your lifestyle in retirement or meet other important goals. You may also consider equity release to cover the cost of later-life care, should you need it.

There are two main options to consider when it comes to equity release.

Lifetime mortgage

This is the most common method of equity release. It works like this:

You take out a loan against the value of your home.
You continue living in the property.
The loan and interest are repaid when the property is sold, often when you pass away or move into residential care.

There are no mandatory repayments on the loan before the property is sold, although you can make voluntary payments. Most reliable providers are part of the Equity Release Council, and one of the organisation’s core standards is that you will never owe more than the property is worth. This is called a “no negative equity guarantee”.

It’s important to check that any provider you use is part of the Equity Release Council so you have this protection.

Home reversion plans

This less common method of equity release involves selling a portion of your home to a provider. You continue living in the home, and when it is eventually sold, the provider receives their share of the proceeds.

Intergenerational gifting through equity release has reached record levels

You may remember at the end of last year, we wrote about upcoming changes to Inheritance Tax (IHT) and pensions and how this could mean that your family faces a larger tax bill when you’re gone.

From April 2027, your pensions will form part of the estate for IHT purposes. Additionally, as important thresholds remain frozen, families are more likely to pay IHT.

That’s why many people are turning to equity release to mitigate IHT.

According to Today’s Wills and Probate, 19% of those who used equity release services from Canada Life in 2025 planned to gift wealth to the next generation. This is the highest figure in the decade since the organisation began recording this data.

If you release wealth from your home now, you can gift it to your loved ones. The first £3,000 an individual gifts each year is automatically IHT-free. Further payments may fall outside of the estate provided you live for seven years after making the gift, too.

When you eventually pass away, and the property is sold, the debt is repaid to the equity release provider, so the value of your home doesn’t form part of the estate for IHT purposes. This effectively allows you to release wealth from your home and pass it to your loved ones without IHT.

However, it’s important to note that IHT gifting rules are not straightforward, and there is a lot of room for error. As such, you will need to seek specialist advice to decide if this is the most suitable strategy for your family.

There are also potential downsides of equity release to consider.

You could pay considerable interest on the loan

When you release equity from your home, the loan will generate interest. As you don’t typically make monthly repayments, this interest builds considerably over time. This could mean that, even if the value of your home rises, you lose much of this equity to interest when the property is eventually sold.

It’s worth considering how this could affect the amount you can leave to your loved ones when you pass away.

Early repayment charges could limit your flexibility in the future

Many equity release providers require early repayment charges (ERCs) if you decide to repay the loan sooner than planned.

This could significantly limit your flexibility in the future. For instance, if you opt for equity release and later decide to downsize your home, you could pay ERCs when you sell the property and repay the loan. The extra charges could significantly increase the cost of moving home.

Alternatively, if you change your mind about equity release and want to leave a larger portion of your home to your loved ones, you might decide to pay off the loan with cash. Again, this could result in large ERCs.

As such, it’s important to check with your provider about any ERCs and how this might limit your financial flexibility in the future.

Careful planning means you could fund your retirement without relying on equity release

While equity release is suitable in some situations, it could limit your financial options in the future and reduce the amount of wealth you leave to loved ones.

We can help you plan for retirement and build wealth earlier in life, so you have enough savings to fund your chosen lifestyle and manage expenses such as care costs. Additionally, we can explore IHT planning strategies to help you pass wealth to the next generation tax-efficiently.

This means you may be able to achieve your retirement goals without relying on equity release.

Get in touch

If you are concerned about how you will fund retirement, we can explore your options.

Please contact us at hello@ardentuk.com or call or WhatsApp us on 01904 655 330. As an award-winning financial advice company with advisers included in the 2025 VouchedFor Top Rated guide, we can assure you that we’re a bona fide company providing excellent advice and high-quality service.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning or tax planning.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Equity release will reduce the value of your estate and can affect your eligibility for means-tested benefits.

A lifetime mortgage is a loan secured against your home. To understand the features and risks, ask for a personalised illustration.