The Long Read
Homeowners unlock equity for upgrades
Older homeowners boost home improvement spending by accessing record equity release loans amid economic uncertainty
Older homeowners are continuing to unlock the value of their property despite economic headwinds, as equity release lending rose 10% year on year in Q2 2025, driven largely by new lump sum borrowers. This trend not only points to the enduring appeal of property wealth as a financial tool but also reflects a growing willingness among consumers to reinvest in their homes—often using these funds for significant renovations and upgrades.
According to the Equity Release Council, total lending reached £636 million in Q2, with more than 14,400 customers drawing on housing equity. Notably, the average new lump sum loan rose to £126,422, a 14% increase from the same quarter in 2024. While drawdown activity also showed marginal growth, the standout figure was the 40% annual increase in further advances, indicating existing customers are returning to tap into more equity—likely reflecting confidence in long-term house prices and a need to fund evolving personal or family needs.
Though equity release is frequently associated with supplementing retirement income or paying down debt, industry data and consumer research suggest that a substantial share of this capital is directed toward home improvement. A 2023 report by Legal & General found that around 30% of equity release customers planned to spend at least part of their funds on property upgrades, ranging from new windows and doors to more extensive structural refurbishments, such as loft conversions or extensions.
This pattern holds strategic appeal for both borrowers and the housing market. For homeowners, especially those intending to age in place, upgrading the home ensures long-term comfort, accessibility, and energy efficiency. For the broader economy, it stimulates demand across the home improvement supply chain—from tradespeople and construction firms to manufacturers of glazing, insulation, and smart home technologies.
“With inflation remaining sticky and interest rates still elevated, many older consumers are opting to invest in their biggest asset—their home—rather than chase uncertain returns elsewhere,” says Clare King, a financial adviser specialising in later-life lending. “Whether it’s installing energy-efficient windows, building a garden office, or future-proofing a home with accessibility adaptations, the focus is on quality-of-life investment.”
The profile of equity release borrowers also underscores a cautious but optimistic consumer mood. While loan sizes are up year on year, quarterly figures show a slight softening—suggesting that homeowners are taking a prudent approach amid short-term house price volatility. Drawdown customers, for example, took an average initial loan of £65,856 in Q2, down 6% from Q1. This suggests an appetite to preserve flexibility by borrowing in stages rather than committing to large sums upfront.
Yet, the long-term view remains robust. The average drawdown reserve—a signal of future borrowing potential—grew 16% year on year, reaching over £53,000. This suggests that borrowers anticipate tapping into equity further down the line, possibly to fund phased renovations or adapt to changing household needs.
Meanwhile, lenders are responding to this complex landscape with a surge in product offerings. The number of available plans more than doubled quarter on quarter to 1,669, half of which now include dynamic pricing linked to borrower profiles and property features. The market is evolving to accommodate increasingly diverse homeowner goals, including the ability to make voluntary repayments or move without penalty—important features for those looking to retain some financial control.
Interest rates on new equity release products have edged up to an average 7.24% APR in Q2, reflecting wider gilt market trends. While this adds a layer of cost, advisers note that many customers view the stability and certainty of fixed lifetime rates—combined with safeguards such as the no negative equity guarantee—as worth the trade-off.
As the UK grapples with a sluggish housing market and an ageing population, equity release continues to provide a financial lifeline for homeowners seeking to enhance their living environments. With more borrowers channelling funds into home improvements, the sector not only enables personal financial resilience but also injects vital momentum into domestic construction and renovation industries.
In a market characterised by caution and complexity, equity release is proving to be a surprisingly resilient lever for both personal and economic transformation.
