Older homeowners are facing a financial squeeze the Triple Lock can’t hide—and the Budget has quietly accelerated the pressure
The government's Budget has made one thing unmistakably clear: pensioners are set for a prolonged squeeze on their finances, despite ministers’ assurances that the State Pension Triple Lock will protect them. And unlike the proposed mansion tax, not due until 2028, the pressure on retirees is already biting.
It’s a contradiction that matters. Pensioner income protections may sound reassuring, but they are increasingly overshadowed by the cumulative weight of other fiscal measures.
The threshold freeze trap
The extended freeze on Income Tax thresholds is perhaps the most insidious of these pressures. As pay and pensions rise with inflation, frozen thresholds quietly pull more people into tax liability. “Extending the freeze on tax thresholds will drag greater numbers into paying more tax to the Treasury, with more pensioners paying Income Tax on their pension payments,” warns Dave Harris, CEO of more2life, pictured right.
The issue reaches far beyond a small group of high-income retirees. Frozen thresholds are steadily drawing ordinary pensioners into the tax system—people who have never before paid Income Tax on their pensions and are now facing unexpected liabilities without the systems or support to manage them.
The inheritance tax creep
Long-standing homeowners face a different kind of drift. Decades of house price growth mean increasing numbers risk crossing Inheritance Tax thresholds through no action or choice of their own. As Harris notes, “There is a bigger chance now that homeowners will see expected house price growth pushing their estates into the area of Inheritance Tax payments.”
In other words, doing nothing—the traditional and often safest strategy for retirees—now carries financial risk. Simply remaining in the family home, with no borrowing and no restructuring, may leave children and beneficiaries with a tax bill they never anticipated.
The mansion tax pressure
Then there's the High Value Council Tax Surcharge (HVCTS)—or "mansion tax". While the levy is initially aimed at properties worth £2 million or more, its long-term reach remains uncertain—particularly in a housing market where price inflation has a long history of pulling more people into tax thresholds over time.
The policy lands hardest on those whose wealth is tied up almost entirely in their homes. “Many homeowners who own higher value properties are often the beneficiaries of house price inflation over the decades and many have very little liquid income, as they are retirees,” says Hiten Ganatra, managing director at Visionary Finance (pictured left). “We have still not cracked the issue of helping such people downsize—whether that’s via monetary policies like removing stamp duty for downsizers or simply building homes suitable for the elderly.”
For these homeowners, illiquidity poses the real challenge. Their incomes may be modest, but their tax liabilities continue to grow in line with asset values they cannot easily access.
Market response accelerates
READ MORE: Why the mansion tax could freeze the prime market
The market is already reacting to these pressures. Mortgage lending to older borrowers has accelerated sharply, according to new figures from UK Finance. In Q3 2025, 39,950 mortgages were advanced to older borrowers—an 18.4% year-on-year jump—with total lending reaching £6.5 billion, up 24.7% on the same quarter a year earlier.
“Today’s figures show strong growth across later life lending, with new loans to older borrowers up more than 18% by number and almost 25% by value in Q3,” Harris says.
Within that, lifetime mortgages saw more modest but steady growth. There were 6,040 lifetime mortgage advances in Q3, up 3.4% year-on-year, with lending of £530 million—an increase of 3.9%. Retirement interest-only (RIO) mortgages, although smaller in scale, rose faster: 335 new RIO loans were completed, up 11.7% annually, with total lending of £30 million, an 11.1% increase.
Later life products now account for 7.84% of all residential lending, and 21.74% of buy-to-let mortgages—evidence that older borrowers are increasingly turning to debt solutions to manage retirement and tax pressures.
Simon Webb, managing director of capital markets and finance at LiveMore, connects this directly to the fiscal backdrop: “In light of the Chancellor's Budget announcement yesterday, we can expect to see later life lending continue on this upward trajectory. The highly anticipated 'mansion tax' will hit older homeowners considerably, leaving those who are asset-rich but cash-poor with significant outgoings. Plus, a continued freeze on income tax thresholds will result in an ever-greater number of pensioners paying income tax on their hard-earned pension pots.”
But Harris argues that the composition of this growth tells its own story.
“Lifetime mortgage lending also rose, but only by around 4%,” he points out. “That gap should not be ignored. It raises a clear question over whether enough older borrowers are being shown lifetime mortgages at the right stage of the advice process. These are modern products with features that can suit older clients far better than some mainstream loans, yet the take-up remains modest even as demand for later life borrowing rises at pace. After yesterday’s Budget confirmed higher tax pressure for many older homeowners, advisers must think carefully about how they are supporting these clients and whether they are offering the full range of solutions, including lifetime mortgages.”
The range of solutions
READ MORE: Later life lending surges
On one level, the story is positive. “The good news here is the later life lending market has evolved significantly, with a wider choice of flexible product options available which can be tailored to match the older homeowner's circumstances,” says Harris.
Webb agrees that product innovation is ahead of many advisers’ understanding. “For more and more older people, releasing funds from their home will be the best way to enjoy a stress-free, supported retirement without moving. While equity release may be the best option for some customers, a RIO mortgage, interest-only product or lifetime mortgage may work better for others.”
The concern, however, is whether advice is keeping pace with both demand and product design.
“The FCA’s Discussion Paper made the need for better access to later life options plain, and these figures underline why that point matters,” Harris argues. “Advisers are central to this. If older borrowers are being placed into mainstream products out of habit, or because lifetime mortgages are not being considered early enough, then we are not getting the most suitable outcomes. The demand is rising, the financial strain on older homeowners is growing, and the product set has never been stronger. Advisers must guide clients through the full list of options, and they must give lifetime mortgages proper attention. Anything less risks leaving older people with mainstream mortgage solutions that do not match their needs.”
For Harris, the Budget should be a turning point in adviser behaviour, not just another policy event to react to.
“This Budget should serve as a prompt for advisers to communicate with their client base, and ensure they are presented with the full range of potential solutions, rather than a narrow selection of mainstream options,” he says.
The Budget has done more than create new financial headwinds. It has exposed the limits of a “do nothing” approach to managing wealth in retirement—and sharpened the focus on whether advisers, lenders and policymakers are truly equipping older homeowners for the tax regime that now awaits them.
