Releasing equity became an increasingly important financial decision for UK homeowners during 2022.
Property values had given many households considerable housing wealth. However, rising living costs, changing retirement needs and existing mortgage balances also created reasons to access that value.
The important question was not simply how much money a property contained. It was how part of that value could be used without weakening the homeowner’s long-term position.
At a Glance
- Releasing equity means accessing part of the value held in your home.
- Homeowners could use a lifetime mortgage, home reversion plan or conventional mortgage route.
- UK equity release lending reached a record £6.2 billion during 2022.
- Lifetime mortgages could provide a lump sum, drawdown facility or both.
- Interest could roll up, increasing the total debt over time.
- From 28 March 2022, new Equity Release Council plans included a right to make penalty-free partial repayments.
- Releasing money could affect inheritance, future borrowing and means-tested benefits.
- Regulated financial and independent legal advice remained central to the process.
What Does Releasing Equity Mean?
Equity is the portion of a property’s value that remains after secured borrowing has been deducted.
For example, a home worth £400,000 with an outstanding mortgage of £100,000 contains £300,000 of gross equity.
That does not mean the homeowner can necessarily borrow the full £300,000. The available amount depends on the product, age, property, lender criteria and existing debt.
During 2022, releasing equity could broadly mean:
- taking a lifetime mortgage;
- entering a home reversion plan;
- remortgaging for a higher amount;
- borrowing through a further advance;
- using another secured lending arrangement.
These routes did not produce the same costs or consequences.
The broader equity release options for homeowners generally include lifetime mortgages and home reversion plans. Conventional mortgage borrowing was subject to a different assessment process.
What Did the 2022 Equity Release Market Show?
The 2022 market reached levels not previously recorded in the UK.
According to the Equity Release Council’s 2022 market statistics, 93,421 new and returning customers accessed property wealth during the year. Total annual lending reached £6.2 billion, compared with £4.8 billion in 2021.
Almost 50,000 homeowners agreed new plans.
The figures showed that property wealth had become a larger part of later-life financial planning. However, the year did not move in one direction.
Activity reached record levels during the first three quarters. Conditions then changed following the market disruption of September 2022. Interest rates rose, product availability reduced and consumer confidence weakened.
This made timing an important part of the decision.
A homeowner considering equity release near the beginning of 2022 could have encountered different pricing from someone applying near the end. Equity release rates are usually fixed for life, so the rate secured at completion can shape the eventual cost substantially.
The 2022 figures therefore showed both demand and sensitivity. More homeowners wanted to access property wealth, yet the long-term cost remained closely connected to wider financial conditions.
Lifetime Mortgages Were the Main Route
A lifetime mortgage is a loan secured against a homeowner’s main residence.
The homeowner retains legal ownership. The mortgage and accumulated interest are normally repaid when the final borrower dies or enters permanent long-term care.
The money may be released through:
- one lump sum;
- a drawdown reserve;
- several withdrawals;
- a combination of lump sum and drawdown.
A lump sum provides the money immediately. However, interest normally begins on the full amount from completion.
Drawdown allows money to be taken in stages. Interest is generally charged only after each withdrawal. This may reduce the eventual cost where the entire sum is not needed immediately.
Our guide to how lifetime mortgages work explains the product structure in greater detail.
An Important Product Change During 2022
A significant consumer protection took effect on 28 March 2022.
From that date, new products meeting Equity Release Council standards had to include the right to make penalty-free partial repayments, subject to the lender’s terms.
This did not turn a lifetime mortgage into a standard repayment mortgage. However, it gave homeowners greater ability to manage rolled-up interest.
For example, a borrower might:
- pay some or all of the annual interest;
- make occasional capital reductions;
- use surplus income to slow balance growth;
- reduce the eventual amount repaid from the estate.
The precise repayment allowance varied between providers. Borrowers still needed to check the product terms and any early repayment charges.
Home Reversion Was a Different Exchange
A home reversion plan did not involve borrowing money in the same way.
Instead, the homeowner sold part or all of the property to a reversion provider. The provider paid a lump sum, a regular amount or a combination of both.
The homeowner could normally continue living in the property under the plan’s terms. However, they no longer owned the proportion sold.
The amount paid for that share was usually below its open-market value. This reflected the homeowner’s right to remain in the property, potentially for many years.
Our explanation of home reversion plans covers the ownership implications and long-term considerations.
Home reversion represented a permanent transfer of property ownership. A lifetime mortgage represents secured borrowing. That distinction was fundamental.
Could a Standard Remortgage Release Equity?
Some homeowners did not need an equity release product.
A conventional remortgage could allow a homeowner to replace an existing mortgage and borrow an additional amount. This route usually required evidence that the monthly payments remained affordable.
Lenders could examine:
- employment or pension income;
- household expenditure;
- credit history;
- age at the end of the term;
- loan-to-value;
- property condition;
- the reason for additional borrowing.
A standard remortgage review could therefore be relevant for homeowners with sufficient income and an acceptable lending profile.
Connect Mortgages also explains the practical process of remortgaging to release equity.
The distinction matters. A remortgage generally depends heavily on monthly affordability. A lifetime mortgage is usually assessed through age, property value and product criteria, although individual circumstances still matter.
Why Did Homeowners Release Equity in 2022?
Reasons varied considerably.
Common uses included:
- repaying an interest-only mortgage;
- funding essential home repairs;
- adapting a property for reduced mobility;
- supplementing retirement income;
- helping children with a property deposit;
- replacing expensive borrowing;
- creating an emergency reserve;
- paying for significant one-off costs.
The purpose influenced which route was appropriate.
Borrowing for urgent structural work differed from releasing a large amount for discretionary spending. Helping family also involved transferring part of the homeowner’s future security to another generation.
Property wealth can support life today. Yet once released and spent, it may not remain available for later housing, health or care needs.
What Were the Main Costs?
Homeowners needed to consider more than the amount released.
Potential costs included:
- interest;
- advice fees;
- legal fees;
- valuation charges;
- arrangement fees;
- early repayment charges;
- reduced estate value;
- the opportunity cost of future property growth.
Rolled-up interest was particularly important.
When interest is added to both the original loan and previous interest, the balance compounds. The effect becomes greater as time passes.
A personalised illustration should show how the debt could develop over several periods. The FCA’s findings on equity release advice emphasised the need for consumers to understand both the short-term and long-term consequences.
Could Releasing Equity Affect Benefits?
Yes.
Money released from a property could affect entitlement to means-tested benefits, depending on how the funds were held or used.
Spending money immediately on an eligible purpose could produce a different result from retaining it as savings. Deliberately disposing of capital to obtain benefits could also be treated differently.
Homeowners receiving Pension Credit, Housing Benefit or Council Tax support needed to check their position before completing.
The official GOV.UK Pension Credit guidance explains how capital and changes in financial circumstances may affect an award.
What Should Have Been Checked Before Proceeding?
A careful 2022 review should have considered:
- The exact amount required.
- Whether the full amount was needed immediately.
- Existing mortgage repayment charges.
- Available savings and income.
- The cost of downsizing.
- Standard mortgage affordability.
- Future moving intentions.
- Health and care expectations.
- The effect on benefits.
- The likely effect on inheritance.
- Whether family members should be involved.
- How the debt could grow over time.
For some homeowners, the broader range of later-life lending options could have provided an alternative to equity release.
The Practical Lesson from 2022
The 2022 market demonstrated that housing wealth had become an active financial resource for many older homeowners.
It also demonstrated that access and suitability were not the same thing.
A property could contain enough equity. A lender could make a product available. The homeowner could still decide that the future cost was too high.
Releasing equity converts part of a long-term asset into money that can be used today. That can solve a real problem. It can also reduce the choices available tomorrow.
The strongest decision, therefore, begins with purpose, not product.
Speak to an Adviser
Releasing equity is a long-term decision involving your home, future finances and estate.
An adviser can review the amount required, potential product structures, costs, alternatives and long-term effects before making a recommendation.
Frequently Asked Questions
Was releasing equity popular in 2022?
Yes. Equity release lending reached a record £6.2 billion during 2022. More than 93,000 new and returning customers accessed property wealth.
Did homeowners still own their property?
With a lifetime mortgage, the homeowner retained legal ownership. With a home reversion plan, part or all of the ownership was sold to the provider.
Did lifetime mortgages require monthly repayments?
Many did not require monthly payments. Interest could instead be added to the loan. However, new Council-standard plans introduced from 28 March 2022 permitted penalty-free partial repayments within product limits.
Was the money released taxable?
Money borrowed through a lifetime mortgage was normally paid without income tax. However, investing the money or retaining it as savings could create separate tax or benefit consequences.
Could releasing equity reduce an inheritance?
Yes. The loan, accumulated interest or property share sold could reduce the value remaining in the homeowner’s estate.
Was professional advice required?
Equity release products required regulated advice. Customers also received independent legal advice before completing a qualifying Council-standard plan.
Risk warning: This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration. A lifetime mortgage is secured against your home and may affect the value of your estate, inheritance and entitlement to means-tested benefits.
