Equity Release Shifts From Lifestyle Spending to Mortgage Repayment, Key Case Data Suggests

Equity release is increasingly being used as a debt-management tool rather than a lifestyle enhancer, according to new customer case data from Key Group.

Analysis of more than 1,000 plans agreed between Q2 2024 and Q1 2025 (to 31 March 2025) shows the proportion of new cases taken out primarily to repay an existing mortgage rising from 36% to 63% over the period.

The shift suggests that later-life homeowners are prioritising the removal of regular mortgage repayments over discretionary spending, using housing wealth to stabilise household finances amid persistent cost pressures.

For financial providers and advisers, the data points to a more necessity-driven use of property wealth – with implications for product mix, demand patterns and long-term borrowing structures.

From Lifestyle Boost to Financial Stabiliser

Discretionary uses fell back in the same dataset. Home improvements declined from 14% of plans in Q2 2024 to 5% in Q1 2025, while property purchases fell from 7.9% to under 2%. Vehicle purchases also reduced from 7.7% to 3.9%, reinforcing the shift away from larger optional outlays.

At the same time, other forms of debt appear to be rising in priority. The share of plans used to clear “other debts” increased from 2.7% in 2024 to 9.1% in Q1 2025.

Holidays rose from 3.2% to 7.6%, suggesting that while households are focusing first on essentials, some are still allocating smaller portions toward quality-of-life spending once core financial pressures have been addressed.

Upfront Borrowing Rises as Drawdown Facilities Shrink

The borrowing structure itself has also shifted. The average initial release increased 13.3% year-on-year to £62,930, while the average total facility (initial release plus agreed drawdown capacity) fell to a four-year low of £78,942.

The average drawdown facility set up alongside plans dropped from £37,744 in 2024 to £16,012 in 2025 – a 57.6% reduction.

That pattern suggests customers are taking more funds upfront rather than holding back larger contingency facilities.

In practical terms, equity release is being used to solve immediate financial pressures – such as clearing a mortgage balance – rather than acting primarily as a longer-term liquidity reserve.

The scale of borrowing is particularly evident in higher-value markets. In London, the average release per plan reached £145,471 in 2025, up £27,462 year-on-year and the highest regional figure in Key’s dataset.

In markets where outstanding mortgage balances are larger, the “clear the debt” rationale becomes more pronounced, reinforcing the shift toward front-loaded borrowing.

Implications for Advisers, Lenders and Long-Term Planning

From a business perspective, the mix matters. Larger upfront advances increase the balance on which interest compounds, shaping lifetime mortgage economics and portfolio performance. Even as overall facility sizes fall, higher initial borrowing can support lending volumes.

A smaller drawdown facility also shifts future rate exposure, as any additional borrowing is priced at prevailing rates.

For lenders, that alters risk dynamics; for advisers, it reinforces the importance of modelling long-term affordability and compounding outcomes.

The data also shows equity release is rarely used for a single objective. While 31.6% of customers used their plan for one purpose, 32.7% split funds across two priorities and nearly a third across three or more – suggesting financial rebalancing rather than one-off spending.

The customer profile reflects mainstream later-life borrowing. The average age was 69, with 59% of applications made jointly. Single applicants accounted for 41%, with women outnumbering men.

Average property value was £319,809, with borrowing at around 19% loan-to-value. Drawdown plans remained more common than lump sum products, despite smaller facilities.

Regulation continues to focus on suitability and transparency. The Financial Conduct Authority has emphasised clear advice standards, while Equity Release Council safeguards – including the no negative equity guarantee – remain key protections.

Rachel East, Senior Director of Later Life Advice at Key Equity Release, said:

“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.”

Lifetime mortgage interest compounds and equity release may affect entitlement to means-tested benefits, so consumers should take regulated advice and consider alternatives.