Homeowners unlocked a record £1.7 billion of property wealth in the three months from July to September, according to new research.

The number of people taking out equity release plans reached 13,452 for the first time during this period, according to trade body the Equity Release Council, as growing numbers of homeowners unlocked some of the wealth in their property without having to sell their home.

Equity release is becoming an increasingly popular option for homeowners aged 55 and over wanting to boost their income, as it can provide a lump sum, regular income payments or a combination of both. Any money released, in addition to the interest that builds up on this, is repaid when the homeowner dies, or moves into long-term care, although plans approved by the Equity Release Council allow you to make partial or full repayments earlier if you want to. You can read more in our article Equity Release – what is it and how does it work?

The average amount of equity released by homeowners is currently £133,770. A total of £4.84 billion was unlocked by homeowners in the first nine months of 2022, marking a 40% increase on the same period last year.

David Burrowes, chair of the Equity Release Council, said: “The summer months have seen the equity release market resume its pre-pandemic growth trajectory, with extra protections having been added in the intervening years so all new customers can make voluntary repayments when they can afford to and reduce their overall costs.

“Equity release is not an overnight purchase, and the desire to secure lower interest rates before anticipated rises is likely to have influenced customers’ timings as they completed deals from earlier in the year.”

However, economic turbulence and political uncertainty over recent weeks following the government’s mini-budget pushed up interest rates on equity release loans. The lowest rate available on an equity release loan is currently 6.90%, compared to 4.44% at the end of September, according to financial data analyst Defaqto. This increase means that a homeowner taking out a £50,000 equity release loan would pay £21,606 more in extra interest over 10 years.

Mr Burrowes said: “Council standards mean there are measures in place to protect customers’ existing loans from rising interest rates, as well as ensuring that people can only take out equity release once they have considered it from every angle through detailed financial and legal advice.”

Why is equity release increasingly popular?

Lifetime mortgages make up the vast amount of equity release plans taken out by homeowners, and these plans can be helpful in the right circumstances. For example, the funds can be used to pay off debts with high interest rates, or simply to boost retirement income when living costs are soaring.

Experts say that the growth of the equity release market may partly be attributed to the rising cost of living and the current economic climate. With inflation at record highs, soaring energy bills and rising mortgage rates, homeowners may be taking lump sums of equity to meet essential costs. Recent data by equity release advice firm Key, for example, shows that 40% of equity release customers used some or all of their funds to repay an outstanding mortgage.

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However, experts warn that taking money out of your property can have a number of implications for tax, benefits, inheritances and long-term financial planning. Equity release products come with risk and won’t be suitable for everyone. Current rules from the financial services regulator the Financial Conduct Authority (FCA) require you to speak to a qualified financial adviser before you are able to take out an equity release product to ensure it’s suitable for your circumstances.

The main risk is that you or your estate could end up paying back a lot more than you borrowed, as interest charges mount up over time, with interest charged both on the original sum and the interest added over time. This is known as compounding. Read more in our article Equity release – what are the risks? and 8 questions to ask yourself if you’re considering equity release.

However, equity release can be the right solution for some to meet living costs. There are plenty of other reasons for releasing a lump sum of equity using a lifetime mortgage, such as boosting retirement income, carrying out home improvements or helping children climb onto the property ladder.

Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.

If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,000 reviews.

Where can I learn more about equity release?

If you are interested in equity release and would like to learn more, our Equity Release section covers everything you need to know.

If you want to see how much you might be able to release from your home and how much it could cost, this equity release calculator can give you an estimate. Fill in a few details to get an estimate.