Are lifetime mortgages about to see a boom?
Older homeowners are increasingly turning to their property wealth to support family, reduce inheritance tax exposure, and manage retirement income, with over-55s unlocking £636 million in the second quarter of 2025 alone.
Advisers and lenders say this isn’t a warning sign, it’s a smart, strategic shift in how retirees are planning their financial legacies.
The surge follows recent changes to inheritance tax (IHT), with pensions set to be included in IHT calculations from 2027. For many, that’s accelerated the decision to gift wealth early through equity release or later life lending products.
Borrowing to support family needs
Lifetime mortgages, once considered a niche option, are increasingly being used to help younger generations now rather than leaving behind taxed estates.
“I am seeing a lot of customers releasing equity from their home to provide early inheritances to children,” said Edward Payne of Family First Finance. “Whilst this can be useful from an inheritance tax planning perspective, more often than not early gifting is driven by some form of necessity—for example, gifting funds to use as a deposit to buy a property.”
Louis Mason of Oportfolio added that homeowners see real value in gifting now, even with higher borrowing costs:
“The potential for the inclusion of pensions within inheritance tax from 2027 is clearly prompting many over-55s to look at equity release to pass wealth to the next generation, in the most tax efficient way possible.”
He believes this strategy will become even more popular, “As long as products remain flexible - offering features such as voluntary partial repayments and inheritance protection - we believe lifetime mortgage demand will only continue to accelerate over the next few years.”
An evolving market meeting complex needs
Dan Osman of UK Moneyman noted that the market is becoming more flexible and better tailored to borrower needs.
“Later life lending is no longer a conversation just about lifetime mortgages. Without doubt the sector is in growth and this trend is likely to continue for the foreseeable future for diverse reasons including IHT issues,” he said.
He also highlighted that many borrowers reaching the end of interest-only terms in the early 2030s may find solutions through either equity release or standard remortgaging, with the right advice. “With a holistic advice process and comprehensive conversation about the various options, we suspect that a large proportion will be able to be re-mortgaged more conventionally,” he said.
As smaller landlords exit the market, Osman also sees older first-time buyers looking for stability. “People fear receiving notice of eviction in their 80s and beyond,” he said, adding that lenders are responding with new product designs and more flexible affordability criteria.
Strategic borrowing still requires good advice
While advisers broadly support the rise in later-life borrowing, Payne emphasised the importance of clear guidance. “Any gifts need to be free and fully documented,” he said, noting that advisers should involve clients’ future beneficiaries and ensure customers receive specialist tax and estate planning advice.
He added that while drawdown facilities can reduce interest costs, the timing of withdrawals matters: “Interest rates are only set on drawn down funds at the time each tranche is taken and will be based on prevailing rates in the marketplace at that time.”
Payne also urged caution around benefit eligibility and future care funding: “Customers need to be very careful that they are not borrowing too much money as this can affect their eligibility for certain benefits.”
Borrowing with confidence
Despite those considerations, advisers agree that for many households, unlocking equity is a rational and empowering choice, particularly when other options like downsizing or life insurance aren’t viable.
“Use of a lifetime mortgage to raise funds to boost income can be a legitimate strategy if there are no suitable alternatives,” Payne said.
With demand rising, lenders innovating, and advisers helping clients navigate options, later-life lending is no longer a backup plan. It's becoming a central strategy for retirement and estate planning, one that’s helping families today, while keeping long-term goals firmly in focus.
