Equity release shifts from lifestyle spending to mortgage clearance as homeowners reprioritise

For years, equity release carried a reputation for funding big “later-life” projects: the kitchen refit, the new car, a helping hand for family, maybe a long-postponed trip. New customer data suggests that story is changing. As higher borrowing costs and everyday expenses continue to squeeze budgets, more homeowners are using property wealth in a simpler, less glamorous way: to get rid of debt and stabilise monthly outgoings.

Fresh first-party analysis from Key Group, covering more than 1,000 customer cases agreed between Q2 2024 and Q1 2025 (data to 31 March 2025), shows a sharp rise in equity release being taken primarily to repay an existing mortgage. Over the period, that core purpose climbed from 36% in Q2 2024 to 63% in Q1 2025, making mortgage repayment the dominant reason customers accessed housing equity in the dataset. The shift is striking because it suggests equity release is increasingly being treated as a practical balance-sheet reset, rather than a discretionary spending tool.

The wider pattern in the figures reinforces that idea. Key Group’s analysis shows the average initial amount released increased by 13.3% to £62,930, the first rise in three years. Taken alongside the surge in mortgage repayment as the main purpose, it hints at homeowners drawing more up front to deal with immediate financial pressures, rather than keeping plans primarily for optional projects.

That “needs-first” ordering shows up even more clearly when you look at what fell away. The proportion of plans used for home improvements dropped from 14% to 5%. Property purchases declined from 7.9% to less than 2%, while vehicle purchases fell from 7.7% to 3.9%. These are exactly the categories often associated with aspirational spending, and their decline suggests customers are pushing non-essentials down the list.

Other categories moved in the opposite direction, but without overturning the broader story. Allocations for other debts rose from 2.7% to 9.1%, indicating a wider focus on reducing liabilities beyond mortgages. Holidays increased from 3.2% to 7.6%, and gifting fluctuated across the year, moving from 5.6% to 12.4% and then to 9.1%. The mix points to a more careful rebalancing than a full retreat from quality-of-life spending: clear the financial pressure points first, then allocate what remains.

Rachel East, Senior Director of Later Life Advice at Key Group, framed the change as a pragmatic response to strained household finances: “Homeowners appear to be taking a pragmatic, two-part approach: using equity release first to secure essentials and ease immediate financial strain, while still setting aside modest sums for holidays, family gifts and other quality-of-life spending. It’s a shift from optional projects toward careful prioritisation”.

A second theme in the data is that equity release is rarely being used for just one thing. Key Group found two-thirds of customers split the money they released across multiple goals. Only 31.6% used their plan for a single purpose (often mortgage repayment or debt consolidation). 32.7% spread funds across two purposes, 21.6% across three, and 9.5% allocated funds to four or more priorities. That allocation behaviour matters because it suggests customers are treating equity release as a planning tool, ranking needs and then distributing the release across those priorities rather than spending it in one sweep.

The profile of customers in the study also helps explain why the product is being used in this way. The average customer age was 69. Applications were 59% joint and 41% single, and among single applicants there were 592 women compared with 423 men. The average property value stood at £319,809, with an initial loan-to-value of approximately 19%, implying many customers are accessing a relatively modest portion of housing equity to address specific needs rather than maximising borrowing.

Plan structure in the dataset points to the same “solve the immediate issue” mindset. By case count, 1,540 plans were drawdown products versus 946 lump sum. Key Group notes that despite drawdown being more common by count, the average drawdown facility size has fallen, indicating larger initial withdrawals and smaller contingency facilities.

There is also a stark regional dimension. In 2025, Key Group says homeowners in London released an average of £145,471 per plan, more than double the UK regional average and the highest figure in the UK by a significant margin, representing a jump of more than £27,000 compared with the previous year. Higher-value markets can clearly magnify both the opportunity and the stakes: they enable larger releases, but also reflect larger liabilities and bigger gaps to bridge when mortgage terms extend into later life.

Put together, the data paints a market that is becoming more utilitarian. Mortgage repayment surges from 36% to 63%, discretionary categories shrink, and multi-purpose allocation becomes the norm. Equity release, at least in this customer sample, looks less like a lifestyle upgrade and more like a financial stabiliser, shaped by the simple reality that predictability has become valuable again.