Equity Release: Scotland – are you eligible?

All the information you need for equity release in Scotland

Written in line with our editorial policy.

Property price increases over the last decade have helped to fuel an 18% growth in Scotland’s equity release market. We take a look at the impact this has had for Scottish homeowners looking to release tax-free cash from their property via equity release.

The equity release industry saw continued growth last year. A record-breaking 93,421 new and returning customers chose to release £6.2billion of their property wealth, according to Equity Release Council figures. But is this retirement lending option as popular in Scotland as it is across the rest of the UK?

In this article we’ll explore the latest trends for equity release in Scotland, including:

• What is involved in equity release?
• Average house value in Scotland rises £60k in ten years.
• What does the house price boom mean for Scotland’s equity release potential?
• Growth in Scotland’s equity release market.
• Can I arrange a Bank of Scotland equity release plan?
• Will slowing property prices affect equity release in Scotland?
• Find out more about equity release mortgages in Scotland.

What is involved in equity release?

Before we delve more deeply into our ‘equity release: Scotland’ market report, let’s take a moment to recap on how a plan works. 

An equity release plan allows homeowners aged 55+ to release some of their home’s value without having to sell or move house. The tax-free cash can be spent in just about any way the homeowner wishes.

A lifetime mortgage is the most popular type of equity release plan today and is available as a lump sum or drawdown plan. Home reversion plans are also available, though they involve selling all or part of your home to a provider.

One of the biggest benefits for Scotland’s equity release customers is that there are no mandatory monthly repayments to make on the loan. This is because the loan plus interest rolls up each month until the plan comes to an end. This is typically when the homeowner/s pass away or move into long-term care. 

Customers can make voluntary payments up to a certain amount each year to reduce the interest accruing, but there is no obligation to. 

Thanks to the rising prices of housing over the last decade in Scotland, equity release customers here have a strong potential to release the tax-free cash needed to enjoy a richer retirement. 

Looking for equity release companies in Scotland? Our selected advisers can provide all the information and quotes you want from the comfort of your own home. Call 0808 178 3055 or request a call back today to arrange an appointment.

Average Scottish house value rises £60k in ten years

The UK enjoyed record average house prices towards the end of 2022 – no doubt a contributing factor to the boom in equity release plans. In Scotland, homeowners have seen the average home there soar by over £30k in the last three years alone.

It means thousands of homeowners across the country are likely to have more equity in their properties than when they purchased them – money which could be put to use during times of need.

When a homeowner’s available equity is calculated, the value of their property is one of the main deciding factors. This will determine how much tax-free money can be unlocked with an equity release plan. Typically, the higher the property is worth, the more cash is available. 

With that in mind, our analysis of equity release in Scotland begins with a breakdown of property prices in the country over the last decade.

Land Registry analysis of Scottish house prices since 2013

It’s a well-known fact that UK house prices have risen significantly over the last decade. Many homeowners in and approaching retirement are in a strong position due to owning their home for quite some years. As a result, they are likely to have benefitted substantially in that time from the overall market increases.

The below table shows how the average home in Scotland has increased since 2013, compared to the average house price in the UK:

SOURCE: Land Registry House Price Statistics in Scotland, Feb 2013 – Feb 2023.

To sum up the numbers in the above table, the average house price in Scotland rose by £60,107 in the last decade – a staggering growth of 50%.

In 2021 alone, £1million was added to the UK’s housing market every single minute according to the Equity Release Council. The good news is that despite economic uncertainty casting a shadow over 2023, this latest data shows that average house prices remain higher than they were one year ago.

Breakdown of house prices by property type

Owners of detached houses across Scotland saw the biggest monetary rise in property prices in the 12 months leading up to February 2023. The average value of a detached home in the country stands at £324,742 – a 2% growth in one year and an increase of £6,266. 

Terraced properties in Scotland saw a rise of 1.7% in the last year, taking them to £152,401 – the largest percentage increase. Semi-detached homes in Scotland enjoyed increases of 1.4% over the year, taking them to an average of £192,197.

Most and least expensive places to buy a home in Scotland

Of course, Scotland is a vast space, so let’s take a look at the Local Authority figures to break things down further.

According to Land Registry data, average house prices across the country range from £136,120 in Inverclyde to £318,408 in East Renfrewshire, the country’s most expensive place to live.

Source: 2023 average house prices, Land Registry data via Registers of Scotland.

Percentage highs and lows

In percentage terms, homes in Nah-Eileanan Siar saw the largest increases to their property prices, with an impressive 6.9% growth in the last 12 months. The Shetland Islands saw the next largest percentage increase of its typical house prices, with a rise of 2%.

On the other end of the scale, The Orkney Islands saw the largest price drop in Scotland, with homes in the area falling by 8.4% in the last year. Inverclyde also saw house prices fall in the region, with properties dropping by 6% over the last 12 months.

What does the house price boom mean for Scotland’s equity release potential?

Later life homeowners in Scotland potentially have a huge amount of equity sitting in their homes today. But how much tax-free money can homeowners in the country unlock?

Equity release plans typically allow homeowners to unlock between 20-60% of their property’s value. Exactly how much you can release depends on age (the older you are the more you can unlock), property type and the location of their home. 

Health is also taken into account, with some qualifying conditions entitling homeowners to a higher cash release. Medical conditions that could secure you more money include high blood pressure, diabetes, a history of strokes or cancer, or having a very high or very low Body Mass Index (BMI).

The table below gives an example of how much equity a typical 74-year-old living in Scotland might have been able to release with a plan over the last decade:

(These are example figures based on a 74-year-old releasing 40% of the total value of their home with a standard lifetime mortgage.)

The homeowner we’ve based these figures on could potentially unlock £13,722 more than they could have done five years ago, thanks to rising house prices. Furthermore, they could potentially now access a huge £24,042 extra tax-free cash than a decade ago, simply for owning their home.

The growth in Scotland’s equity release market

With average house prices doing so well in Scotland, it’s easy to see why so many are now choosing to tap into the extra funds. From home improvements and holidays, to help with paying bills and paying off the mortgage; equity release offers a solution for those who may otherwise be struggling to make ends meet.

The end-of-year figures compiled for the Equity Release Council’s Autumn 2022 Market Report indicates the rising popularity of equity release schemes in Scotland. It reveals that between the years 2017-2021 there was an 18% increase in the number of equity release plans arranged specifically in Scotland. 

It also highlights that in 2021, more than 1 in 10 (11%) of new equity release plans were arranged in Scotland, Wales or Northern Ireland. 

In addition to booming house prices, the equity release industry is likely to be reaping the benefits of its efforts to offer more flexibility and choice to customers.

For instance, since March 2022, all new equity release plans from members of the Equity Release Council allow customers to make voluntary partial repayments on plans to reduce interest. 

Some plans today even allow customers to repay up to 10% of the loan plus interest every year penalty-free. It means homeowners could effectively pay off their plan in as little as ten years.

Use our equity release Scotland calculator to discover how much you could unlock from your home. It is free and simple to use!

Will slowing house prices affect Scotland’s equity release market?

Savvy equity release customers naturally pay close attention to house prices in their area. But with gloomy forecasts of a drop in UK house prices by as much as 10% in 2023, how will Scotland’s equity release customers fare? 

The good news is that, according to The Herald newspaper, Scotland is one of only three UK regions which saw prices continue to rise in March 2023. 

Homeowners should also consider that even if the predicted drop in value does come about, properties across Scotland are likely to remain far higher in value than ten years ago. This extra equity could go a long way in helping later life homeowners across the country.

Rising demand for prime properties in Scotland 

Scotland has an impressive offering of prime residential properties in both urban and rural locations. A recent prime market report in Scotland by Savill’s found that the number of sales for properties worth over £500,000 is quickly rising. The property agent’s data reveals that sales for these properties were 5% higher in the first quarter of 2023 compared to the same period in 2022, and 13% higher than 2021.

Savill’s analysis of Scotland’s prime residential market highlights strong buyer demand in the first three months of 2023. A staggering 52% more buyers registered to buy property between Jan and March than in the same period in 2019 before the pandemic struck.

Could this demand for prime properties spur an onward demand for smaller, less expensive homes as wealthier, later life homeowners vacate their large prime properties?

Those in or approaching retirement traditionally choose to downsize to properties that are easier and less expensive to maintain. This can create demand and thus raise the price of smaller, ‘oven-ready’ houses and bungalows that are well maintained and require little spending on them.

As we know, house prices determine how much homeowners can unlock from their properties. With demand for housing expected to keep prices elevated in the country compared to a decade ago, will Scotland’s equity release market grow in 2023? Only time will tell.

Can I arrange a Bank of Scotland equity release plan?

Are you looking for a reputable equity release companies in Scotland? If so, you might be wondering if Bank of Scotland equity release plans are available. 

We have checked and unfortunately this bank does not offer equity release mortgages. Scotland homeowners can, however, get all the information and quotes you need from the comfort of your own home. For your convenience, our selected advisers can even arrange your equity release plan for you over the phone and by post.

If you are currently perusing equity release, Scotland customers can speak to Equity Release Wise for an unbeatable service. Our team will be happy to answer any initial questions you have about a plan, before putting you in touch with a qualified equity release specialist. 

As part of the service, they will also be able to recommend equity release solicitors in Scotland, too, so you’ll have everything you need to get started.

What are the main types of equity release in Scotland?

For those considering equity release, Scotland’s homeowners can choose between a lifetime mortgage or a home reversion plan. 

Lifetime mortgages

These are the most popular type of equity release plan as there are more options to choose from and you will continue to own 100% of your home. They are typically available to homeowners aged 55+. Some of the choices you have are:

• Interest-only lifetime mortgage. This allows you to make regular payments to pay off all or some of the interest to prevent or reduce interest from accruing on your loan.
• Drawdown lifetime mortgage. Instead of taking all of your available cash in one go, you can access an initial lump sum at the start, then ‘draw down’ further funds as and when you need to. This can save you potentially thousands of pounds over the life of your plan.
• Downsizing protection. Some providers allow you to downsize your home and settle your plan without penalty in the years after your spouse/partner passes away or moves into long-term care.
• Enhanced lifetime mortgage. If you have a qualifying medical condition or lifestyle factor then you could unlock more money from your home or achieve lower interest rates. 

Home reversion plan

Available to homeowners who are 60+, you may be able to release more money from your home with this type of plan. 

Instead of borrowing the money and accruing interest, you sell all or a percentage of your home to a reversion company in exchange for a tax-free cash lump sum or regular income. There is no interest to pay, but the home reversion company will pay you well below market value for the share they buy.

You then live in your home rent-free with the same rights as a tenant. When you pass away or move into long-term care then your home is sold and the reversion company can take their percentage.

Am I eligible for equity release in Scotland?

The first step to finding out how much you can release is checking your eligibility. To be considered for equity release, Scotland’s homeowners must meet these criteria:

• Your age – 55+ for lifetime mortgages and 60+ for home reversion.
• Your property’s value – typically at least £70,000 for lifetime mortgages and £100,000 for home reversion.
• Your property type – some properties are harder to get equity release on, such as houses of non-standard construction.
• Your property’s location – lenders may be unable to accept properties in certain locations that may adversely affect future saleability.
• Your outstanding mortgage – you should either have no mortgage outstanding, or an amount that can be paid off with some of the money you release.

Read more in our guide: Are you eligible for equity release?

What can you use the money you release for?

You can use the tax-free cash you release through equity release for just about any legal means. Here are some examples of the reasons that people choose equity release:

• Pay off your existing mortgage.
• Clear other debts.
• Home improvements.
• Enjoy super holidays.
• A new car.
• Make gifts to loved ones.
• Pay medical or home care bills.
• Supplement your regular income.

Read more in our guide: What can you use equity release money for?

What are the disadvantages of equity release?

Equity release may be attractive to you due to the potential for tax-free cash with no regular repayments, but there are potential downsides and risks to consider. 

For example, taking out an equity release plan will reduce the value of your estate and the amount of inheritance you can leave to your family. You should also remember that with a lifetime mortgage, the total loan amount can grow quickly as the interest rolls up on a compound basis. Releasing money might also affect your entitlement to some means-tested state benefits.

Read more in our guide: The pros and cons of equity release

Find out more about equity release mortgages in Scotland

Anybody thinking about unlocking some of their property wealth should seek the guidance of an equity release adviser who is free to advise if a plan is right for you or not.

You don’t need to scour the internet for a reputable equity release company. Scotland homeowners can get in touch with our friendly specialists, who can provide all the equity release advice Scotland customers could need. 

Our friendly team of selected advisers are specialists in equity release. Scotland homeowners can explore all options, ask any questions you might have and gather all the quotations needed from the comfort of your own home. 

Remember, you’ll only be charged a fee for the advice provided if you choose to go ahead with your recommended plan. This is usually paid from the money that you unlock. 

Find out if you qualify for an equity release plan and how much you could release by speaking to Equity Release Wise today. Use our free equity release Scotland calculator, call 0808 178 3055 or request a call back at a time that suits you.

About Clare Yates. With over a decade’s experience writing about later life financial planning, Clare offers a wealth of knowledge about equity release, pension annuities, wills, LPAs and more. When she isn’t writing, Clare likes to spend her time baking and going on walks with her husband, two children and their rescue dog. Follow Clare on LinkedIn