Equity release companies lent a total of £655m in the first three months of 2025 – an increase of 32% compared with the year before.  

This marks the fourth successive quarter of growth, according to new figures from the Equity Release Council.

Here, we explain what’s driving the increase, how equity release works and what you need to consider before using it.

Why equity release lending is on the rise

Equity release is a way for over-55s to unlock some of the wealth tied up in their home to provide extra funding in retirement.

The Equity Release Council says that the recent growth in lending is down to a significant increase in new customers taking lump sums, supported by greater product choice and an annual rise in house prices. 

The average amount borrowed by customers who chose a lump sum product (47%) was £127,414 in the first quarter of 2025 – up 23% year on year.

The alternative is a ‘drawdown plan’, where you can make several withdrawals rather than taking a one-off lump sum.

New drawdown customers are continuing to take smaller percentages of their total loans up-front – between 50% and 60% during 2024 – compared with 70%+ during 2021 and early 2022. 

If you take out an equity release product recommended by HUB Financial Solutions, Which? will earn a commission to help fund our not-for-profit mission.

How to release equity from your house

Lifetime mortgages are the most popular type of equity release. You take out a loan against your property, which is repaid from the proceeds when it’s sold. 

The amount you can borrow depends on your age and how much your home is worth. You’ll need to be at least 55, but the older you are, the more you can borrow. 

The maximum you can borrow will vary from provider to provider. Currently, at age 65 you’ll typically be able to borrow between 35% and 39% of the market value of your home, rising to between 40% and 44% at age 70. 

You can opt to take a lump sum – where interest is charged on the whole amount at a fixed rate – or take chunks of cash when you need it, only paying interest on the money you’ve taken. 

By spreading out the amount you borrow in this way (known as ‘drawdown’), you’ll reduce the impact of compound interest. 

• Find out more: what is equity release?

New protections for equity release customers who move in with relatives

The Equity Release Council has just updated its consumer protections to reduce fees for borrowers who need to move in with a relative for care reasons. 

Moving in with family in this situation previously meant that the borrower could face early repayment charges if they repaid their loan at the same time. 

But as of this month, if a customer needs to move permanently into long-term care – whether in a care home or with relatives providing care – any early repayment charge will be waived by lenders that are members of the Equity Release Council. 

Early repayment charges on equity release plans vary, but they can be as high as 25% of the amount borrowed.

Will equity release rates fall?

The Bank of England base rate was cut in early May, but this doesn’t necessarily mean equity release rates will follow suit.

It’s gilt rates (UK government bonds) that determine equity release rates, and these have been on an upward trajectory since January 2024 as investors look for guaranteed returns amid global economic uncertainty. 

The average interest rate on new equity release products launched in the first three months of 2025 was 7.15%, up from 6.67% in the first three months of 2024. 

• Find out more: Bank of England base rate explained.

Is equity release a good idea?

An equity release plan can prove useful if you have value tied up in your property, but are worried about having enough to live on in retirement, paying for care or funding large expenses. 

You can use the tax-free cash however you wish and will be able to stay in your home for the rest of your life or until you move into care.

But it’s not a decision to be taken lightly. It can be very expensive, especially if you don’t make any voluntary repayments. This means that the amount you can leave behind for loved ones will be reduced. 

If you change your mind, repaying your loan early often triggers an early repayment charge. 

• Find out more: equity release pros and cons.

Alternatives to equity release

Equity release is more likely to be suitable if you’re older, own an expensive property outright that’s expected to increase in value and you don’t intend to pass it on when you die. 

If you decide that equity release isn’t for you, here are some alternatives: 

• Downsizing Our investigation found that you can potentially unlock hundreds of thousands of pounds by moving to a smaller property, even after paying stamp duty.
• Remortgaging Increasing numbers of lenders offer retirement interest-only mortgages (RIOs). These allow you to pay off the interest on the loan each month and the original value of what you borrowed is repaid when you die or move out.
• A personal loan or credit card For smaller amounts, borrowing via an unsecured personal loan or interest-free purchase credit card could be much cheaper than equity release, as long as you can keep up with repayments.
• Rent a room If you have a spare room in your home that you’d be happy to rent out, the government’s Rent a Room scheme lets you earn up to £7,500 a year tax-free. The tax exemption is automatic, so you only have to fill in a tax return if you earn more than £7,500 in any year.