Equity release finances around £1 in every £90 spent by retired people within the UK, according to analysis.
Total retirement spending funded by equity release could top £4 billion this year and £5 billion in 2025, according to modelling by the Centre for Economics and Business Research (Cebr), as homeowners increasingly look to property wealth to support their retirement.
Equity release products allow older people to access the equity, or cash, tied up in their home.
In 2021, equity release funded an estimated £3 billion worth of retirement domestic spending, according to Legal & General and Cebr’s the Equity Economy report.
About £330 million of new equity released in 2021 is estimated to have left the UK economy in the form of overseas holiday spending.
Equity release spending by retirees is often used for occasional big purchases such as home improvements including to improve energy efficiency, furniture or a new car, the report found.
Other uses include medical expenses, maintaining living standards in retirement, holidays and paying off debts.
Craig Brown, CEO, Legal & General home finance, said: “The impact of the equity release market is more significant than just the spending power it gives to customers, it also makes a positive contribution to the UK economy.”
Equity release may reduce the amount of inheritance people have to leave behind when they die and potentially affect their benefit entitlements, and so it needs careful consideration. There may be options to ringfence some of the value of a home as an inheritance.
There may be other alternative options such as downsizing or using savings. Taking independent financial advice can help people to weigh up their options.