The Current State of Equity Release in 2023: The equity release market entered 2023 in a more cautious position.

After the final quarter of 2022, lifetime mortgage rates rose, borrowing limits reduced and some products were withdrawn.

However, the market did not stop. It changed shape.

In 2023, homeowners, lenders and advisers became more focused on suitability, flexibility and long-term cost.

Richard Turner, Senior Mortgage Broker at Connect Lifetime Mortgages, said the product range would take time to recover from the disruption seen in late 2022.

That view remains important. Equity release is not only about accessing money. It is about understanding what is being exchanged for that access.

Why 2023 Mattered For Equity Release

The equity release market moved from rapid growth into a more measured phase during 2023.

For many homeowners, this created uncertainty. For advisers, it changed the questions that needed to be asked.

The earlier market had been shaped by low rates, rising house prices and wider product choice. By 2023, the position was different.

Higher borrowing costs affected lifetime mortgage pricing. Lenders reviewed how much they were prepared to offer. Some products were removed or amended.

This did not mean equity release had lost its place. It meant the market had become more technical.

Homeowners could no longer look only at the amount available. They also needed to understand the cost of borrowing, product features and long-term impact.

That is where regulated mortgage advice became even more important.

What Changed After Late 2022?

The final months of 2022 had a clear effect on the later-life lending market.

Lifetime mortgage rates increased. Some lenders reduced loan-to-value limits. Others withdrew products while pricing and risk were reviewed.

This mattered because equity release is long-term borrowing.

A small change in the interest rate can have a larger effect over time. That is because interest may roll up if no payments are made.

In practical terms, 2023 created three main changes:

• Some homeowners could borrow less than expected.
• Product choice became narrower for a period.
• Advice had to focus more heavily on affordability, alternatives and future plans.

This was not only a pricing issue. It was also a confidence issue.

When markets move quickly, people often pause. That pause can be sensible. A later-life mortgage should not be rushed.

Richard Turner’s View on the 2023 Market

Turner says, “Last year’s last three months saw a lot of changes in lifetime mortgage products. The interest rates increased significantly, and the amount you could borrow decreased. Some products were even taken away, and some lenders stopped offering these mortgages. 

“In 2023, the interest rates have decreased and stabilised, like regular mortgages, and lenders have started offering these mortgages again. However, the product range will take some time to return to its 2022 level. Lifetime mortgages are still a good option with flexible features, but they might take some time to get used to due to the current cost and availability.” 

Turner’s views on equity release bring us nicely into this segway. Alice Watson, head of marketing communications at Canada Life UK, said: “It’s clear that the current economic climate isn’t helping consumer confidence, and that is being felt across the housing market. As a result, advisers are predicting a return to previous equity release transaction levels later this year or into 2024, with a shift to younger borrowers with smaller loan values.

“The equity release market has weathered previous economic headwinds and provided financial resilience to households nationwide. With the right advice, it can offer flexible ways to meet individual customer needs and will undoubtedly continue to adapt.”

What the 2023 Figures Show

The 2023 market was smaller than the record levels seen in 2022.

The Equity Release Council later reported that total annual lending reached £2.61bn in 2023. This was below the £6.2bn recorded in 2022.

That fall matters, but it should not be read as the end of demand.

It shows that the market became more cautious after a period of rapid growth.

It also shows a change in how homeowners used equity release.

Drawdown plans returned as the majority preference in 2023. This matters because drawdown can allow homeowners to take an initial amount and reserve more for later.

That can help reduce interest build-up when compared with taking a larger lump sum immediately.

However, drawdown is not automatically better. Future withdrawals may be charged at the rate available at the time.

A homeowner still needs advice on timing, cost and suitability.

For more detail on release limits, see Connect Lifetime’s guide to how much equity can I release from my home.

Why Smaller Borrowing Became More Relevant

In 2023, many homeowners had to rethink how much they released.

A higher-rate environment can make large releases more expensive over time.

This does not mean a smaller release is always correct. It means the amount should match the need.

There is a difference between what a lender may offer and what a homeowner should take.

A suitable recommendation should consider:

• The existing mortgage balance.
• The homeowner’s age.
• Property value and condition.
• Health and lifestyle factors.
• Whether family members should be involved.
• Benefits, tax and estate-planning effects.
• Whether downsizing or another mortgage could work.

This is why equity release should not be treated like a simple cash withdrawal.

A home is not only an asset. It is also shelter, memory, security and future choice.

The question is not only “Can I release money?”

The better question is “What does this decision protect, and what does it reduce?”

Lifetime Mortgages Remained the Main Product

Most equity release activity relates to lifetime mortgages.

A lifetime mortgage is a loan secured against the home. The homeowner usually keeps ownership of the property.

The loan and interest are normally repaid when the last borrower dies or moves permanently into long-term care.

Some plans allow voluntary repayments. Some allow interest payments. Some provide inheritance protection or drawdown facilities.

These features mattered more in 2023 because product design became central to suitability.

A lifetime mortgage with repayment flexibility may suit one homeowner. Another may need a different route entirely.

This is why a page about equity release mortgages should not only explain access to funds.

It should also explain cost, control and future consequences.

Why Home Reversion Plans Need Separate Explanation

Home reversion plans are also a form of equity release, but they work differently.

With a home reversion plan, the homeowner sells part or all of the property to a provider.

There is usually no mortgage interest in the same way as a lifetime mortgage. However, the homeowner gives up ownership of the share sold.

This can reduce what the estate receives later.

Home reversion plans are less common than lifetime mortgages. They may suit specific cases, but they need careful legal and financial consideration.

For most homeowners researching what is equity release, the important starting point is understanding that these two products are not the same.

Why Advice Standards Mattered in 2023

The equity release market in 2023 was not only about rates and lending volumes.

It was also about the quality of advice.

Later-life lending can involve older homeowners, long-term commitments and family considerations. Some customers may also have vulnerable circumstances.

That makes clear advice essential.

An adviser should explain:

• Why is equity release being considered?
• Whether a standard mortgage or a later-life mortgage could work.
• Whether downsizing has been considered.
• How interest may build over time.
• How the plan could affect inheritance.
• How it could affect means-tested benefits.
• Whether family discussions are appropriate.
• What happens if the homeowner wants to move?

This is where good advice becomes more than product selection.

It becomes a test of whether the decision still makes sense in future years.

What Homeowners Were Really Asking in 2023

The 2023 market created practical questions.

Many homeowners wanted to know whether rates would fall again. Others wanted to know whether they should wait.

Some needed funds for existing mortgage repayment. Others wanted to help family members, improve their home or support retirement income.

These are different needs. They should not lead to the same answer.

A homeowner repaying an interest-only mortgage may face a different decision from someone funding home improvements.

A homeowner gifting money to children may need to think about inheritance tax and future care needs.

A homeowner using funds for income may need a wider retirement review.

That is why equity release should be considered within the wider financial picture.

It may sit alongside pensions, savings, family support, property plans, mortgage protection and life insurance.

What Lenders Looked at More Closely

During 2023, lenders became more careful about pricing and risk.

They had to consider interest rates, property values, longevity assumptions and product guarantees.

This affected the amount available to some applicants.

The maximum release was not based only on the property value. It also depended on age, product type, health, lender rules and the wider rate environment.

This is why online calculators can only give an early estimate.

They cannot replace a personalised illustration.

A personalised illustration should show the rate, amount borrowed, potential roll-up of interest and the possible effect on the estate.

The Philosophical Point: Access is Not the Same as Suitability

Equity release can appear simple from the outside.

A homeowner has value in the property. A lender offers a way to access part of it.

Yet the real decision is more layered.

The homeowner is exchanging some future value for present flexibility.

That may be reasonable. It may even be the most practical option.

However, it should never be reduced to a quick answer.

A financial decision in later life should create clarity. It should not move uncertainty into the future.

The right plan is not always the one that releases the most money.

It is the one that fits the need, the property, the family position and the long-term cost.

What this Means For the Current State of Equity Release in 2023

The current state of equity release in 2023 can be described in one sentence.

The market became smaller, more cautious and more advice-led.

That is not necessarily negative.

A slower market can encourage better questions. It can also help homeowners focus on product details rather than headline borrowing amounts.

The key issue is suitability.

Equity release may still help some homeowners access funds tied to their home. It may help repay an existing mortgage, fund essential work or support later-life planning.

However, it may not be suitable for everyone.

The decision must be tested against alternatives.

These may include downsizing, using savings, support from family, a standard remortgage, a retirement interest-only mortgage or other later-life lending options.

When Should a Homeowner Seek Advice?

A homeowner should seek advice before making any decision on equity release.

This is especially important where:

• There is an existing mortgage to repay.
• The homeowner wants to gift money.
• Benefits may be affected.
• The property may be sold later.
• Family members may be relying on inheritance.
• The homeowner may need long-term care.
• The release amount exceeds the immediate need.

The adviser’s role is not simply to arrange a plan.

It is to test the reason for the plan.

That distinction matters.

If equity release is suitable, advice should explain why.

If it is not suitable, advice should explain the alternatives.