Growing concerns about inheritance taxes and sticky inflation cause equity release to jump 4%

The total number of plans has decreased, but the amount of money taken out by equity release has increased

Due to sticky inflation and impending changes to inheritance tax regulations, the amount of money being withdrawn through equity release has increased by 4% annually and is still rising.

According to the most recent quarterly report from the Equity Release Councils (ERC), customers took out a total of 639 million worth of housing equity in the third quarter of 2025, up from 615 million in the same period last year.

By taking out a loan on the equity you still have in your house, equity release allows you to access money that is locked up in it.

Lifetime mortgages and home reversion plans are the two primary categories.

With lifetime mortgages, you take out a loan against the value of your house, plus interest.

In home reversion plans, you sell a portion of your property for a lump sum payment that is tax-free, and then you live in your house as a tenant for free. Because you've sold off a portion of your house, this lowers the value of your estate, but unlike a lifetime mortgage, there is no debt to pay back.

You typically need to be over 55 in order to apply for a lifetime mortgage, but you are not required to have paid off your previous mortgage.

Usually, home reversion plans are only accessible to mortgage-free individuals over 60.

Both of these equity release methods allow for the withdrawal of funds in lump sum or through drawdown, which is a series of regular payments.

When the person who obtained the funds through equity release passes away or enters long-term care and their property is sold, the funds are typically reimbursed. A lifetime mortgage can also be repaid with monthly installments.

In Q3, customers took out more cash through equity release than in 2024, but fewer plans were taken out overall.

In Q3 of this year, 13,158 plans were taken out, an 8% decrease from 14,281 plans in the same period last year.

In Q3 2025, the average lump sum amount deducted through equity release was 116,507.

In the second quarter of 2025, homeowners took out 636 million dollars through equity release, a 10% increase over the previous year.

This was less than the 665 million that were unlocked in the first three months of this year, which was a 32 percent increase over the previous year.

In a different guide, we examine what to consider when contemplating downsizing or equity release.

Is the purpose of releasing equity to evade inheritance tax?

According to some experts, the rise in home equity withdrawals can be attributed to the impending modification of inheritance tax laws, which will include pensions in estates starting in April 2027, as well as any announcements that may be made in this month's budget.

"Recent tax changes and the upcoming Autumn Budget may be prompting people to take stock of their financial planning strategies," stated Nick Flynn, retirement income director at Canada Life. The "

Others think that the rise might be the result of people's actual wealth being eroded by inflation. The Bank of England's (BoE) 2 percent inflation target is currently exceeded by the Consumer Price Index (CPI), which measures inflation at 3.8 percent.

According to Sarah Coles, senior personal finance specialist at Hargreaves Lansdown: "Inflation might be the cause.

"People may have discovered that their expenses have increased beyond what their pension can cover and that they require an alternative. A "

Advantages and disadvantages of equity release.

According to Coles, retirement interest-only mortgages, a third type of equity release, can offer a one-time cash infusion to pay for home improvements or medical expenses, while lifetime mortgages, the most common type of equity release, can help people who are unable to cover daily living expenses with their pension.

According to David Forsdyke, head of later life finance at Knight Frank Finance, equity release through drawdown can help you gradually increase your income to cover living expenses as well. Interest is only assessed on the money you have actually taken.

However, both cautioned that using equity release as a way to obtain funds carries a number of serious risks.

Coles stated that if the debt accumulated on the loan has substantially reduced the equity of your house by the time you come to sell, it may prevent you from downsizing in the future.

Lifetime mortgage Forsdyke added interest rates are currently between two and three percent higher than those of regular mortgages.

If this is left to compound, your beneficiaries may receive a smaller inheritance upon your passing.