Equity release doubled in the UK – with holidays a major factor, study shows

Over 55s were cashing in on the equity in their homes to release funds for purchases like luxury holidays, research of long-term trends shows.

A study by Nottingham Trent University (NTU) and the University of Aberdeen Business School found that the number of equity release loans taken out in the UK more than doubled during a ten-year period.

The figures showed that in 2022 there were 52,295 equity loans taken out in the UK compared to just 20,108 in 2009. However, that figure is believed to have now reduced since 2022.

Equity release allows homeowners to borrow cash against money tied up in their properties, with the loan amount plus interest being repaid when they die or move into a care home.

The remainder of their equity is typically then either spent on care home fees or inherited by family in the event they pass away.

Research led by Dr. Alla Koblyakova – an expert in real estate finance – suggests that more people are turning to the equity in their homes to fund once-in-a-lifetime trips, as well as paying for improvements to their properties, or to help loved ones purchase their first home.

"Our results show that housing equity may be needed by homeowners to maintain their quality of life, and suggest that pensioners are more likely to use equity in their homes for holidays," said Dr Koblyakova, whose research was published in International Real Estate Review journal.

“This study shows that increases to the cost of package holidays coincides with a corresponding increases in the size of equity release loan-to-value ratios (LTVs), meaning people are taking more money out their homes when the costs of holidays goes up. We do not see the same relationship with increases in household energy bills, for example.

“It could be that many pensioners are freeing up some of their invested capital in their retirement to enjoy the holidays they may have always wanted, or to maintain the quality of life they enjoyed during their working lives.

“These results also reveal that pensioners tend to release funds to adapt their homes for their increasing special needs as they grow older, addressing shortfalls in their pension at the later stage of their lives.”

The research found that the region with the largest average equity loan size was London with £167,900 during Q1 2023, compared to £43,798 in the North East.

“This could reflect wealthier households having more equity to release, and lenders being more willing to provide large loans to people living in areas with high growth in house prices,” said Dr Koblyakova, of the School of Architecture, Design and the Built Environment at NTU.

The study was based on data taken from the Product Sales Data Base (PSD) collected by the Financial Conduct Authority (FCA), UK Equity Release Council Statistics, Council of Mortgage Lenders Dataset, Office for National Statistics (ONS), Department for Work and Pensions Statistics Dataset, European Mortgage Federation Statistics, Regulated Mortgage Survey Data, and the BoE statistical database.

It was carried out in collaboration with Professor Norman Hutchison and Emeritus Professor Bryan MacGregor, both of the Centre for Real Estate Research, University of Aberdeen Business School.