To fund their retirement, half of UK homeowners will have to draw from their home equity

According to recent studies, unlocking property wealth could contribute £1 billion annually to the UK economy by 2040

There are billions of pounds waiting for them if they do, but a recent study predicts that millions of UK households will need to use their housing wealth to pay for their preferred retirement lifestyle.

More than half (51 percent) of homeowners over 60 may be able to access their housing wealth in retirement through later life lending, commonly referred to as equity release, by 2040.

According to a study by consumer rights group Fairer Finance, there is a huge potential for a whopping 23 billion to be taken out of housing wealth annually in this manner, in 2025 prices.

It might provide a way for millions of homeowners who are asset rich but cash poor to escape this situation.

The study estimates that the median lifetime amount taken by those who do have access to housing wealth is £140,000 in today's prices.

According to a 2024 Scottish Widows report, nearly four out of ten (38 percent) future retirees are on track to earn less than the minimum retirement living standards advised by the Pensions and Lifetime Savings Association based solely on pension and savings levels.

However, the most recent data from March 2022 from the Office for National Statistics revealed that, on average, people in the UK own 40% more housing wealth than pension wealth (35%). This indicates a significant mismatch between retirement funding strategies and available resources.

By 2040, unlocking housing wealth could contribute 21 billion of gross value added annually to the UK economy, in addition to increasing pensions, according to Fairer Finance.

The Financial Conduct Authority (FCA) and the government must take steps to remove obstacles that keep older homeowners from accessing their home equity and to incorporate housing wealth into traditional retirement planning in addition to pensions, according to the Fairer Finances report.

The managing director of Fairer Finance, James Daley, states: "Millions of people will be unable to maintain their living standards in later life due to a combination of escalating care costs, longer lifespans, and smaller pensions.

However, a large number of people are sitting on and sleeping in a substantial store of wealth that is owned by approximately 75% of the population as they approach retirement.

How do I get access to my wealth in housing?

Currently, there are two main ways for people to access their housing wealth: later life lending, also referred to as equity release, or downsizing, which involves selling their home and moving to a less expensive one.

Some households may choose to use both of these, and they are not mutually exclusive.

With an equity release mortgage, homeowners 55 years of age or older can withdraw money from the equity in their home without having to vacate.

When the borrower (and any spouse) dies or enters long-term care, the loan secured by the home is typically compensated for by selling the property.

Home reversion and lifetime mortgages are the two most popular forms of equity release.

Home reversion allows you to access the funds associated with your home by selling all or a portion of it. You are still able to live there for free. When you pass away or enter long-term care, the loan is only paid back when the property is sold.

With a lifetime mortgage, the borrower receives a lump sum payment or ongoing payments on a long-term loan secured by the property. The loan is paid back when the homeowner passes away or enters long-term care, and interest accrues over time.

What obstacles exist for downsizing?

The Fairer Finance study identifies three major obstacles for people who want to reduce their workforce.

First of all, many people are unable to locate appealing options in their local area due to a shortage of appropriate retirement housing.

Second, downsizing still has high costs, which are made worse by stamp duty. The buyer of any major residential property costing more than 125,000 pounds in England and Northern Ireland is required to pay stamp duty if the elderly homeowner does find a suitable property.

According to Fairer Finance, consumer ignorance and social stigma rank as the third major obstacle.

The report states, "Many people do not see using housing wealth to fund later life as a mainstream option, and it is not currently part of the retirement conversation."

When customers engage with Pension Wise or MoneyHelper as they get closer.

According to the report, there is a dearth of practical guidance regarding housing wealth in retirement, for instance.

What are equity release's advantages and disadvantages?

Homeowners took out 32% more wealth from their properties in the first three months of 2025 than they did the previous year, demonstrating the growing popularity of equity release.

In the first quarter of this year, customers used equity release to access housing equity totaling 665 million, according to the most recent quarterly market report from the Equity Release Councils (ERC).

This is the fourth consecutive quarter that equity release has increased, up from 504 million for the same period last year.

However, deciding to go with an equity release is a big decision, so it's crucial to get financial advice from an FCA-regulated equity release adviser first.

Equity release benefits and drawbacks.

Benefits of equity release.

Affordability assessments are generally less burdensome than standard mortgages; you can ringfence a portion of your home's value for your beneficiaries so they can inherit it; homeowners can access their property wealth without having to sell their home; you can give money before death to reduce the value of your estate for IHT purposes; and in certain situations, there are no ongoing monthly repayments required.

It can be challenging to remortgage or move once you have chosen equity release. The lump sum you receive from equity release can affect eligibility for certain means-tested benefits. If you repay the equity release loan earlier than expected, there may be early repayment charges. According to Jim Boyd, chief executive of the Equity Release Council, which commissioned the report, "We know younger homeowners are interested in using money in their homes in later life to meet a range of financial needs as generous final salary pensions all but disappear." Equity release is a type of loan where interest is payable on the debt, which can accumulate over time and leave less for your loved ones to inherit.

The report released today pushes us to create a framework that views housing wealth as a fundamental component of retirement planning, eliminates regulatory obstacles, and provides individuals with the assurance to manage it sensibly.