Equity release: one-in-four now use funds to repay borrowing

This is according to research from equity release provider Pure Retirement. Their latest research looked at customers’ reasons for taking out a lifetime mortgage - the most popular form of equity release.

They found that one-in-four (25%) of lifetime mortgage customers in the last quarter used their funds primarily to repay borrowing.

Previously, raising funds for home improvements was the main reason people used equity release. But that’s changed against a backdrop of rising mortgage costs and stubborn inflation. The top reason now is to repay debt - whether that’s to clear an existing mortgage or settle other outstanding debt.

H2: The cost of living continues to bite

Some older homeowners managing mortgage repayments in retirement are really feeling the pinch. Despite recent drops in interest rates, mortgage costs are still significantly higher for many borrowers than they have been in previous years.

At the same time, rising living costs and persistent inflation have added a further strain on expenses. This cocktail of financial pressures has made it harder for some retirees to cover everyday expenses alongside their other commitments.

There doesn’t seem to be much of a let-up in sight either. According to the BBC, the Bank of England expects inflation to rise further this year, spiking at 3.7% between July and September 2025 due to higher energy prices, water bills and bus fares.

As a result, more equity release customers are citing clearing debt as their driver for borrowing, rather than ‘lifestyle’ reasons such as home improvements and holidays.

H2: How does equity release work?

Equity release enables homeowners aged 55+ to tap into their property wealth to unlock tax-free cash, without any mandatory monthly repayments to make.

The loan plus interest is instead paid off when the homeowner passes away or moves into long-term care. This is typically done via the sale of the customer’s home, with any remaining money available to their estate in the normal way.

H2: Growing preference for drawdown lifetime mortgages

In addition to driving more people to access their property wealth, experts suggest that recent interest rate trends are influencing a shift in product choice.

The latest figures from the Equity Release Council show that more homeowners are opting for drawdown lifetime mortgages. These allow them to access funds in stages rather than as a lump sum, potentially benefiting from future drops in interest rates.

The Bank of England has reduced interest rates three times between August 2024 and February 2025, with further cuts expected this year.

In 2024, drawdown plans made up 56% of new lifetime mortgage business, compared to 44% for lump sum products. Commenting on this in its Q4 2024 report, the Equity Release Council noted: “Customers are clearly holding out for the potential to make future drawdowns at lower rates if pricing continues to fall.”

H2: How shopping around can save potentially thousands in interest

With interest rates influencing the financial decisions of older homeowners, it’s important to consider the value of shopping around before committing to a plan. Analysis from Equity Release Wise, based on Advise Wise data, reveals that the best available rate may be significantly lower than the average market rate.

As one example, they found that a 65-year-old with a £200,000 property in Peterborough seeking a single life plan could achieve a best rate of 5.36% at the start of October 2024.

Yet the average interest rate seen for new lifetime mortgage products at the same time was 6.47%. This means the best available rate at the time was more than a full percentage point lower than the average.

Securing a more competitive rate can save thousands of pounds in interest over the life of a plan. However, not everyone has the time or knowledge to scour the market for the best deals. This is why Money-saving expert Martin Lewis has previously written about the importance of using a specialist adviser.

He said: “A qualified adviser will be able to compare equity release deals from across the market. This means you'll get the best advice and be recommended products tailored to your circumstances. You should consider using an adviser that's also a member of the Equity Release Council.”

All plans approved by the Equity Release Council come with key safeguards, including theno-negative equity guarantee. This ensures your estate will never owe more than your home’s value.

As with any financial commitment, understanding your rights and seeking the advice of a specialist can help ensure the right decision for individual circumstances.