Equity release and the impact on the UK rental market

Is equity release impacting the rental market?

Written in line with our editorial policy.

Equity release has become increasingly popular in the UK in recent years. More homeowners are choosing to release equity from their homes to supplement their retirement income. But has this had any impact on the UK rental market?

Demand for rental homes rose 23% in a single year, according to recent research by Rightmove reported by the Guardian. Meanwhile, average rents in the private rental market rose by 4.4% in 2022 according to the Office of National Statistics. With fierce competition for suitable rented accommodation, anything impacting the rental market could come under scrutiny.

This made the team here at Equity Release Wise ask ourselves: “Does equity release have an impact on the UK rental market?” We know that changes in the economy, demographic shifts and government policies have had an effect. But what about equity release?

In this article we share our thoughts, starting with a reminder of what equity release is:

• How does equity release work?
• How does equity release affect the UK rental market?
• Rooms to rent
• Buy-to-let
• Helping older people to stay in their home
• Releasing cash to maintain or repair a rental property

If you are considering equity release to access some of the wealth tied up in your home, we can help. Our selected advisers are available to discuss your circumstances, offer advice and help you find suitable plans. Just call us on 0808 178 3055 or request a call back for a no-obligation appointment. You can also check your eligibility and see how much you could release.

How does equity release work?

Equity release allows homeowners to release equity from their property without having to sell it. In 2022, 93,000 UK homeowners borrowed £6.2 billion through equity release, according to the Equity Release Council.

There are two types of equity release, a lifetime mortgage and home reversion. Both enable you to stay in your home for life or until you move into permanent long-term care.

The eligibility criteria for equity release products vary depending on the provider. But generally, homeowners must be over the age of 55 and own their property outright or have a small mortgage left to pay.

How does equity release affect the UK rental market?

There are a few ways that UK homeowners’ ability to access cash via equity release might potentially affect the rental market in the UK:

Rooms to rent

Equity release may enable some homeowners to access additional income, reducing the need for them to rent out a room to lodgers. It could therefore reduce the availability of rooms to rent. 

However, according to data reported by Landlord Zone in 2021, there was: “A considerable rise in the number of homeowners taking in lodgers over the last ten years.” Therefore, it is perhaps unlikely that equity release has had a significant impact on the availability of rooms for lodgers.

Buy-to-let

Equity release is potentially a way for some people to purchase a buy-to-let property. In our guide to equity release for buy-to-let, we explain how this might be possible through a buy-to-let lifetime mortgage. For example, equity release might be a way that someone can access cash to use as a deposit on a buy-to-let property. They might then arrange a buy-to-let mortgage to complete the purchase.

There are also specialist plans that may enable a landlord to unlock cash from a buy-to-let property. This has the potential of enabling landlords in need of extra cash to hold onto a property and continue to rent it out, rather than having to sell it.

Helping older people to stay in their home

Equity release might also have a positive impact on the rental market by reducing the number of retirees who need to rent. By accessing a cash lump sum or income, retirees may be able to clear their mortgage and stay in their home for life. 

This includes people at the end of an interest-only mortgage needing cash to clear their remaining mortgage capital. In fact, the Equity Release Council mentioned this in its latest report on the equity release market. (See: Q4 Equity Release Market Statistics).

Without the availability of this cash, some people may be forced into rented accommodation. Therefore, equity release may help to reduce the demand for rental properties and ease pressure on the rental market.

Releasing cash to maintain or repair a rental property

Another reason that people might choose equity release is to fund maintenance or repairs to accommodation they rent out. Accessing funds like this could potentially enable landlords to maintain rental properties at a suitable standard. A landlord might otherwise be forced to sell a property, possibly removing it from the rental market.

Looking for advice on Equity Release?

Arranging an equity release plan on your home is a significant financial commitment. That’s why you should consider all the pros and cons of equity release. We also encourage you to talk to one of our selected advisers for further information and advice. They can also obtain quotes from leading equity release providers, helping you find the most suitable plan and best deal for your circumstances.

Please do call our friendly UK-based team today on 0808 178 3055 or request a call back. We’ll be delighted to connect you to one of our selected advisers. Alternatively, check your eligibility and get an initial indication of how much tax-free cash you could unlock.