One crucial question remains as equity release grows in popularity among retirees: "Is equity release safe?" Many homeowners are eager to unlock cash from their properties but are equally concerned about the risks, regulations, and long-term impact.

At BankingTimes, our financial experts are dedicated to providing the latest, fact-checked insights to help you make informed decisions.

In this guide, we’ll explore the safeguards that protect borrowers, potential pitfalls to watch out for, and why expert advice is essential before committing to an equity release plan.

Read on to find out about the safety of equity release in 2025...

Is Equity Release Safe and Secure?

Equity release is generally safe and secure when taken through a reputable provider regulated by the Financial Conduct Authority (FCA) and follows Equity Release Council (ECR) standards.

This ensures that the provider follows strict rules and guidelines to protect consumers, with protections that include a no negative equity guarantee, ensuring you will never owe more than your property's value, and the right to remain in your home for life.

However, equity release can impact inheritance, eligibility for means-tested benefits, and overall financial planning, which is why seeking independent financial advice and comparing products from reputable providers can help ensure a secure and informed decision.

Ultimately

By taking these precautions and working closely with trusted professionals, homeowners can enjoy the peace of mind that comes with a safe and secure equity release option and avoid bad equity release companies.

What Is the Equity Release Council?

The Equity Release Council (ERC) is a trade body dedicated to protecting and guiding consumers in the equity release market, playing a crucial role in ensuring that equity release products are safe, fair, and transparent.¹

Its primary responsibility is to enforce strict codes of conduct that all members must follow, guaranteeing high standards of consumer protection.

Through these rigorous standards, the ERC ensures that equity release products are suitable and beneficial for homeowners considering this financial option.

Read On: Gaining a Better Understanding on the ERC

What Is the Financial Conduct Authority?

The Financial Conduct Authority (FCA) is the UK’s regulatory body responsible for overseeing financial markets, including the equity release sector.²

Its primary role is to ensure that financial institutions, including equity release providers, operate in a way that prioritises consumer interests with guidelines focused on ensuring that financial products and services are fair, safe, and clearly explained to those who use them.

The FCA enforces strict regulations designed to protect consumers, promote transparency, and maintain trust in the financial industry.

Other Organisations That Can Help With Retirement Financial Advice

Several organisations can help with retirement financial advice, guiding equity release, pensions, and later-life financial planning; these organisations include Citizens Advice, Age UK, and the Money and Pensions Service (MaPS).

These are the organisations you can consult with:

• Age UK provides advice tailored to older individuals' queries and concerns.³
• The Money and Pensions Service (MaPS) offers impartial and complimentary financial advice.⁴
• Citizens Advice is a trusted organisation that offers free, impartial advice on managing finances in retirement.⁵

Pros and Cons of Equity Release

The pros and cons of equity release display how this product can provide financial flexibility in retirement but should be carefully considered; the pros include access to tax-free cash and the flexibility to use funds as needed, while the cons involve reduced inheritance for beneficiaries, as the loan and interest are repaid from the sale of your home.

Some of the main advantages include:

• Access to Funds: Homeowners can get a lump sum.
• Ownership Retention: With lifetime mortgages, homeowners keep their property.
• No Negative Equity: ERC-standard products ensure you will not owe more than the home's value thanks to a No Negative Equity guarantee.
• Tax-Free Funds: Money accessed is typically tax-free.
• Drawdown Flexibility: Some plans let homeowners withdraw money from a cash reserve as and when needed

Some disadvantages to consider include:

• Interest Growth: Accumulating interest can increase the debt over time.
• Benefit Impact: A lump sum might affect eligibility for some state benefits.
• Less Inheritance: Releasing equity may diminish the value of your inheritance.
• Repayment Penalties: Some plans charge for early repayment.
• Moving Constraints: Relocating may be restricted by property criteria.

What Are the Pitfalls of Equity Release?

The pitfalls of equity release include the potential for interest accumulation over time, reduced financial flexibility, and potentially hidden fees.

It is imperative to thoroughly understand these pitfalls and consult a financial adviser before making any decisions; doing this ensures you avoid any equity release horror stories.

Here are some of the key drawbacks to be aware of:

• Compounding Debt: The rolling-up interest can rapidly increase the overall debt.
• Fixed Rates: Being locked into a rate can be unfavourable if market rates plummet.
• Reduced Financial Flexibility: Tapping into equity now may limit financial options for unexpected future needs.
• Planning Conflicts: Equity release can sometimes interfere with other long-term financial strategies.
• Hidden Costs: Some plans come with undisclosed fees or costs that can catch homeowners off guard.

Common Myths About Equity Release

Common myths about equity release include the belief that you will lose ownership of your home, that you must make monthly repayments, or that equity release will automatically affect all benefits, but these aren't necessarily true.

An equity release adviser or broker will help you navigate these myths, ensuring you make the most informed financial decision for your situation.

Let us set the record straight on some common misconceptions:

• Inheritance Concerns: Many believe that this form of borrowing prevents leaving an inheritance. In reality, certain plans let homeowners set aside a part of their property's value for their heirs, making it possible to access funds and leave an inheritance.
• Family Debt Fears: Contrary to the myth that it burdens your family with debt, products adhering to the ERC's standards come with a No Negative Equity guarantee, ensuring your family will not be left with additional debt, even if the house value drops below the loan amount.
• Home Ownership Misunderstandings: There is a misconception that releasing equity means giving up home ownership; in truth, with a lifetime mortgage, homeowners retain legal ownership, using the home only as loan collateral.
• Mobility Myths - Some think that after releasing equity, moving houses is not possible. However, many equity release plans offer flexibility, allowing homeowners to relocate and carry over their plan as long as the new property meets the provider's criteria.

Common Questions

In Conclusion

Equity release offers homeowners a valuable way to unlock the wealth in their property, but it’s a decision that requires careful thought and understanding.

Taking the time to research your options, seeking expert advice, and fully understanding the terms can make all the difference in ensuring a safe and suitable choice.

Ultimately, the question "Is equity release safe?" comes down to the provider you choose, the safeguards in place, and how well the solution aligns with your financial needs.