London equity release – Are you eligible?

Updated: 18th June 2024

Update on equity release for London homeowners

Written in line with our editorial policy.

Average property values in London are well above the minimum for equity release eligibility. This opens up the availability of this form of lending to thousands of London homeowners aged 55+.

That will be good news if you are looking for a way to unlock tax-free cash from your home – without having to make monthly repayments on a loan. Thousands of people each year are turning to equity release as it provides an alternative route to traditional lending.

If you are 55+ and would benefit from a cash boost to achieve your financial goals, you might be wondering if you could be eligible for a plan too. To find out, and to see how you might go about arranging equity release in London, make sure you read this guide.

• How does equity release work?
• How much could I release?
• Why are property prices important with equity release?
• What does the house price boom mean for London equity release potential? 
• How do property prices differ across London boroughs?
• What are the main types of equity release in London?
• Extra flexibility adds to the popularity of today’s equity release plans.
• Am I eligible for equity release in London?
• What can you use the money you release for?
• What are the disadvantages of equity release?
• Alternatives to equity release in London.
• Find out more about London equity release.

How does equity release work?

Before we get into our London equity release market report in detail, it’s worth just clarifying what equity release is and how it works. The main attraction of equity release is that it gives homeowners aged 55+ the chance to tap into the equity in their home without having to move. 

A lifetime mortgage is the most popular form of equity release. As well as the benefit of being able to stay in your home, it also means you can access cash with no need to make monthly payments. This is because the loan plus interest is typically only repaid when the homeowners pass away or move into long-term care.

Many people living in the capital will be aware that they have an especially strong potential for accessing helpful levels of tax-free cash with equity release. As we’ll discuss in this report, that’s because they often find themselves with significantly more equity than those living elsewhere in the UK.

How much could I release?

How much you can release depends on several factors, including your property’s value, location and your age. But as a guide, according to the Equity Release Council, the average single lump sum amount released by lifetime mortgage customers was £100,978 in 2023. 

The above is just an average figure of course – customers have released far more and far less than that figure. You can use our free online equity release calculator to find out how much you could unlock from your home.

It is also important to remember that you don’t have to release the full amount that you might be eligible for. You can also access your money in smaller amounts over time if you wish.

You might also find that you can release more money, or achieve a lower interest rate, due to your health or lifestyle. This is because enhanced plans are available to people with poor health or those who have a history of smoking for example. 

Why are property prices important with equity release?

The value of your property is one of the main factors in determining how much tax-free cash you can access through equity release. The more your property is worth, the more you can potentially unlock. This is why an analysis of equity release in London starts with a look at property prices.

It’s been widely publicised that house prices in London have risen dramatically over the past decade or so – despite a recent cooling-off of the housing market.. This table shows how they have risen since 2014, compared to UK average house prices: 

SOURCE: Land Registry House Price Statistics in London, March 2014 – March 2024.

In 2022, Canada Life revealed that London homeowners collectively had £146.3bn of potential equity to unlock. This equates to around £191,000 of average equity per home in the capital. With many people finding themselves ‘asset rich, cash poor’ in retirement, could we see more homeowners turning to their properties to boost their income?

What does the house price boom mean for London equity release potential?

The surge in house prices over the last decade  – albeit with a recent cooling off of the market – means that London homeowners have potentially hundreds of thousands of pounds of extra equity available. So just how much equity can Londoners unlock?

A homeowner aged 55+ can typically unlock 5-50% of their home’s value with equity release. Just how much depends on criteria including their age (the older you are the more you can unlock), property type and location.  

Let’s look at how much equity a typical 74-year-old living in London may have been able to unlock with an equity release 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 plan. The homeowner we’ve based these figures on could potentially unlock £55,305 more than they could have done ten years ago, thanks to rising house prices.

How do property prices differ across London boroughs?

The average London property price data only tells part of the story when it comes to the potential for equity release. Property values differ greatly across London boroughs, as this sample of Land Registry data for ten of the 32 boroughs shows:

Londoners will of course be well aware of the huge disparity in property prices across the boroughs. This has a big impact on how much individual homeowners can access via equity release.

What are the main types of equity release in London?

For those considering equity release, London 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.

Extra flexibility adds to the popularity of equity release

Equity release plans have evolved significantly over the last decade, and a number of helpful features available with today’s plans mean you may be able to:

• Guarantee an inheritance for loved ones

• Make ad hoc voluntary repayments to minimise the interest accruing

• Arrange an interest-only lifetime mortgage to prevent the loan from increasing

• Access enhanced, lower rates or more cash if you have one or more qualifying health conditions

• Unlock tax-free cash with second home equity release or buy-to-let equity release

With hundreds of plans now available, together with more flexible features to appeal to today’s homeowners, the equity release sector continues to grow. Whether that changes in the future if house prices begin to fall, only time will tell. But for now there is certainly lots of choice for London equity release customers.

Am I eligible for equity release in London?

The first step to finding out how much you can release is checking your eligibility. To be considered for equity release, London 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 once-in-a-lifetime 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

Alternatives to equity release in London

Of course, Londoners have options other than equity release open to them when looking for a lump sum or extra income in later life. Downsizing is one possibility, but many people who have lived their whole lives in London are understandably unwilling to move out of the capital. The prospect of selling the family home to access some of the equity from it can be very upsetting. 

Thanks to equity release, London homeowners aged 55+ can unlock the tax-free cash from their properties without having to sell or move away from the home they love. Of course, this should be done only after taking professional advice and carefully balancing the pros and cons of each option.

Remortgaging is another option for those looking to tap into their growing equity. However, those in need of a cash boost in later life might be reluctant to take on the burden of more monthly repayments for a remortgage deal. With equity release, there are no mandatory monthly repayments. Instead, the loan plus interest is repaid when your plan comes to an end, usually when you pass away or move into long-term care.

Find out more about London equity release

At Equity Release Wise, our friendly team of selected advisers are specialists in equity release. London homeowners can benefit from a simple, hassle-free quotation service to discover how much tax-free money you could unlock. 

Find out if you qualify for an equity release plan and how much you could release by speaking to Equity Release Wise today. Our selected advisers can answer all your questions and search for the best deals personalised to you. To find out how much you could borrow, check here, call 0808 178 3055 or request a free call back at a time that suits you.

Sources

Average amount of equity released £100,978 in 2023. Q4 and FY 2023 equity release market statistics. Equity Release Council. Accessed 11 June 2024.

London average house prices, 2014-2024: House price data for London. Land Registry. Accessed 11 June 2024.

Average UK house prices, 2014-2024: UK House Price Index. Land Registry. Accessed 11 June  2024.