New data from Key Advice suggests a marked shift in how older homeowners are using equity release, with a growing number directing funds towards paying off existing mortgages.
Key’s latest analysis shows that in the first quarter of this year, 63% of plans were used to clear mortgage debt, compared with 36% in the second quarter of last year. The firm says the trend reflects borrowers’ focus on financial stability as higher-than-expected interest rates and persistent inflation continue to squeeze household budgets.
Despite the sharp rise in mortgage repayment activity, two-thirds of customers still used their released equity for a mixture of goals, underlining the increasing versatility of modern lifetime mortgages and their role in broader financial planning.
The average initial release in the first quarter reached £62,930, up 13% year on year – the first increase in three years. Homeowners in London withdrew an average of £145,471. However, the average total facility, including agreed drawdowns, fell to £78,942. According to Key, this reflects a shift towards meeting immediate needs while advisers remain cautious about adding unnecessary borrowing costs.
SHIFT IN SPENDING PRIORITIES
The latest figures highlight a notable change in how borrowers are using property wealth. Those funding home improvements dropped to just 5%, down from 14% a year earlier. Spending on cars also declined sharply, from 7.7% to 3.9%. Where customers did opt for home improvements, the focus tended to be on accessibility, energy efficiency or safety rather than cosmetic projects.
Gifting to children or grandchildren accounted for 9.1% of activity, making it one of the most common uses of funds. With the November Budget expected to impose greater tax burdens on many households, Key anticipates that tax-efficient intergenerational wealth planning will remain a central theme.
Other notable uses included 9.1% of customers paying off unsecured debts, while spending on holidays increased to 7.6% from 3.2%.
The typical customer was aged 69, with couples making up 59% of applications. Single women continued to outnumber single men. The average property value stood at £319,808 and the average initial loan-to-value was 19%.
FINANCIAL RESILIENCE IN LATER LIFE
Rachel East, director of advice and adviser services at Key Advice, said: “Equity release has become more about financial resilience. Stubbornly high interest rates and ongoing cost of living pressures are pushing households to use some of their property wealth to manage essentials first.
“Along with the increase in gifting, this reinforces the view of equity release as a strategic financial tool and that is being increasingly deployed to safeguard day-to-day financial stability and assist younger generations who are in need of assistance.
“Customers spread funds across multiple goals showing equity release is increasingly relevant as part of a holistic plan to fund later life.”
Key’s findings indicate that equity release is continuing to evolve, with homeowners increasingly treating it as a flexible tool for managing both immediate pressures and long-term financial plans.
