Educational, not advice. This article explains what the Financial Conduct Authority has said about later life lending and how the main products work. It is general information, not personal financial advice. Equity release is a regulated product that can only be arranged after advice from an FCA-authorised adviser, and Savvy Investor Guide does not recommend any product or provider.
What this article covers: the FCA’s “fourth pillar” argument, the products it means, how the cost builds up, today’s protections, what is changing and when, and the questions to ask first.
What it does not cover: which product or provider is right for you, or how to use housing wealth to plan for inheritance tax. Both need personal advice.
In short
- The FCA wants housing wealth treated as a fourth source of retirement income, alongside the State Pension and workplace and personal pensions, not as a last resort.
- It also says the market is not ready. Of almost 330,000 mortgages advanced to over-55s in 2025, only 9% were lifetime mortgages or retirement interest-only loans.
- The lifetime mortgage is the main product, now more than 99% of equity release. With no repayments, interest compounds, and at 6.5% the debt roughly doubles in 11 years.
- Protections exist. Advice is compulsory, and plans meeting Equity Release Council standards carry a no negative equity guarantee and the right to stay in your home for life.
- Two FCA decisions are due this year: a policy statement on mortgage rules, including retirement interest-only lending, and interim findings from its market study of later life mortgages.
- Borrowing against your home can reduce means-tested benefits and what you leave behind. Check both before anything else.
Most retirement planning rests on three sources of money: the State Pension, a workplace pension and whatever personal pension or savings you have built up. On 16 June 2026, at the Later Life Lending Summit, the FCA’s director of retail banking, Emad Aladhal, asked a room of lenders and advisers a pointed question about that habit: “Why should retirement planning focus only on these 3 pillars, and not on all assets available to the consumer?”
The asset he had in mind is the home. For many people nearing retirement it is worth more than their pension, and the pensions system largely ignores it. His speech set out the regulator’s view that borrowing against housing wealth should become a normal, planned part of retirement income. It said just as plainly that the market is not yet positioned to deliver that at scale.
If you own your home and wonder whether it could help fund your retirement, both halves matter.
Why the FCA is making the case now
The starting point is a savings gap. The speech cites the Pensions Commission’s finding that 15 million working-age adults will not have the retirement income they aspire to. A large share of household wealth, meanwhile, sits in bricks and mortar. The Office for National Statistics’ latest wealth survey, covering April 2020 to March 2022, put net property wealth at 40% of household wealth in Great Britain, ahead of private pension wealth at 35%.
The FCA also quoted Fairer Finance research suggesting that by 2040, 51% of households aged 60 and over could benefit from drawing on their housing wealth. Those households are expected to hold around £4.3 trillion in property, and the same research puts the sum that could be released at around £23 billion a year in today’s prices.
Today’s market is a fraction of that. In the FCA’s words: “of the almost 330,000 mortgages advanced to over-55s in 2025, only 9% were lifetime mortgages or retirement interest-only products. That is only around 30,000 contracts last year.” The regulator puts that down to problems on both sides: too few products and too little engagement from lenders and advisers, and customers who do not think of their home as part of their retirement plan.
What counts as later life lending
“Later life lending” is an umbrella term for several products that work in quite different ways.
- Lifetime mortgage. You borrow against your home and usually make no monthly payments. Interest is added to the loan, and the whole debt is repaid from the sale of the home when you die or move permanently into long-term care. You can take one lump sum, or a smaller initial amount with a “drawdown” reserve to dip into later, paying interest only on what you have drawn. This is equity release as most people now know it: the Equity Release Council says lifetime mortgages are more than 99% of the market.
- Home reversion plan. You sell all or part of your home to a provider, for less than its market value, in return for a lump sum or income and the right to live there for life. It is the older form of equity release, and now rare.
- Retirement interest-only (RIO) mortgage. You pay the interest each month, so the debt does not grow, and the loan itself is repaid when you die, move into care or sell. The lender must be satisfied you can keep up the payments, including on a reduced income.
- An ordinary mortgage that runs into retirement. Many lenders now offer standard repayment or interest-only mortgages to older borrowers, with the term running to a later age. They are assessed on income like any other mortgage.
How the cost builds up on a lifetime mortgage
The feature that makes a lifetime mortgage attractive (no monthly payments) is also the one to understand best. Unpaid interest is added to the loan, and next year’s interest is charged on the larger total. This is roll-up, and over a long retirement it compounds hard.
The table below is our own illustration, not a quote from any lender. It assumes £100,000 borrowed at a fixed 6.5% a year, compounded annually, with nothing repaid. Real plans often compound monthly, which pushes the total slightly higher. We have not quoted a market average rate because we could not find a current, dated figure we were prepared to rely on. Your adviser must show you the actual figures for any plan you consider.
| Years since borrowing | Amount owed (illustrative) |
|---|---|
| 0 | £100,000 |
| 10 | about £187,700 |
| 15 | about £257,200 |
| 20 | about £352,400 |
At that rate the debt roughly doubles every 11 years. Two things soften the picture. Many plans let you pay some of the interest voluntarily, without penalty, which slows the growth. And taking the money in stages through drawdown means interest runs only on what you have actually drawn.
Repaying the whole loan early is a different matter. Lifetime mortgages usually carry early repayment charges in the first years of the plan, and some set the charge by movements in government bond yields since you borrowed, which makes it hard to predict. If there is any chance you will want to repay, sell up without taking the plan with you, or pass the home on unencumbered in the next few years, ask how the charge is worked out and what it would come to in a few sample years.
The protections that already exist
Advice is compulsory. Equity release can only be arranged through a firm and adviser the FCA has authorised to advise on it. The Equity Release Council also requires every customer to take independent legal advice from a solicitor before the plan goes ahead.
The Equity Release Council’s standards. Most providers belong to the Council, and a plan can only be described as meeting its standards if it meets every one of them. For lifetime mortgages they are:
- The interest rate is fixed, or if variable, capped, for the life of the loan.
- You can stay in the property for the rest of your life, or until you move permanently into care, as long as it remains your main home and you keep to the terms.
- You can move to another property and take the plan with you, subject to the provider’s lending criteria at the time.
- A no negative equity guarantee: once the home is sold for the best price reasonably obtainable, you or your estate will never owe more than the proceeds, even if the loan has grown beyond them.
- You can make penalty-free payments, subject to the plan’s lending criteria.
The protections are real. They are not the whole story. In 2023 an FCA review of equity release advice found some firms were not checking customers’ circumstances properly and were steering them towards lifetime mortgages without discussing alternatives. That history is part of why the regulator now says the market is not ready.
What the FCA is changing, and when
- Mortgage rules, including RIO lending. Consultation paper CP26/18, open from 9 June to 28 July 2026, proposed changes to the lending rules for interest-only and retirement interest-only mortgages, among others, so that creditworthy older borrowers can get a mortgage. The FCA expects to publish final rules in a policy statement in the second half of 2026.
- A market study of later life mortgages. MS26/1, launched on 20 March 2026, is examining lifetime and RIO mortgages: how customers decide, the whole customer journey, and how people weigh the alternatives, including ordinary mortgages. The FCA intends to publish interim findings in the fourth quarter of 2026.
- Advice. The FCA held workshops over the summer on what it would take to make “more holistic advice” a reality: advice that looks at pensions, savings and housing together instead of one product at a time.
- Targeted support. The new “targeted support” regime, in force since 6 April 2026, lets firms make suggestions suited to groups of customers in similar circumstances. It launched for pensions and investments. We have found no FCA statement extending it to equity release or other housing wealth.
Later life lending is also one of the remaining themes in the FCA’s wider review of mortgage rules, and the FCA has said policy work on those themes will continue through 2027. Expect the rules to keep moving after this year’s decisions.
Where the equity release market stands
The Equity Release Council’s figures for April to June 2026, published on 3 August, show a market picking up but still below last year:
- Total lending of £597 million, up 4% on the previous quarter.
- 13,489 customers, including 5,307 taking out equity release for the first time. New customers were up 9% on the quarter and level with a year earlier.
- An average new lump sum of £113,779, and an average initial drawdown of £63,642.
- 74% of advisers surveyed said customers were waiting for borrowing costs to come down before going ahead.
Those customers are not wrong to watch rates. With a fixed lifetime rate, the rate on the day you borrow shapes the whole cost of the loan, as the table above shows. The Bank of England held Bank Rate at 3.75% on 17 September 2026.
What it can mean for benefits and inheritance
Means-tested benefits. Money released from your home counts as savings once it lands in your account. Pension Credit, for example, ignores savings up to £10,000, but above that every £500 counts as £1 a week of income and reduces what you receive. Other means-tested help, such as Council Tax Reduction, has its own savings rules. A large lump sum can cost you benefits, and drawing smaller amounts only when you need them is one reason drawdown plans exist. Ask for a benefits check before you borrow.
Inheritance. A lifetime mortgage is repaid from your estate, usually from the sale of the home, so it reduces what you leave. The no negative equity guarantee means your family will not inherit a debt, but they may inherit much less than they expected. Talk to them early.
The April 2027 pension change. From 6 April 2027 most unused pension funds and death benefits will count towards the value of an estate for inheritance tax, which we cover in our guide to pension inheritance tax in 2027. Some advisers now bring housing wealth into the same planning. That is a matter for personal advice, and nothing here suggests you should do it.
Questions to ask before you go further
- Is the firm authorised for this? Check the firm and the individual adviser on the FCA Register, and make sure they hold permission to advise on equity release, not just general authorisation.
- Does the plan meet Equity Release Council standards? Ask directly, and ask for it in writing.
- What will I owe after 10, 15 and 20 years? Ask for the figures at the actual rate, with and without any voluntary payments you might make.
- What are the early repayment charges, and how are they calculated? Ask for examples in several different years.
- What happens to my benefits? Ask for a benefits check covering the amount you plan to take.
- What are the alternatives? Downsizing, an ordinary or retirement interest-only mortgage, using other savings, or help from family. A good adviser should go through these with you, not just the product they sell.
- Who else needs to know? Anyone who lives with you or expects to inherit the home should understand what the plan means for them.
MoneyHelper, the free government-backed guidance service, publishes guides to equity release and retirement interest-only mortgages, and is a sensible first stop before paying for advice. There is no free guidance appointment for housing wealth of the kind Pension Wise offers for pensions. That is one of the gaps the FCA’s work is trying to close.
Common questions
What does the FCA mean by the “fourth pillar” of retirement?
It is the FCA’s term for housing wealth as a source of retirement income, alongside the three pillars most planning relies on: the State Pension, workplace pensions and personal pensions. The phrase comes from a speech by its director of retail banking on 16 June 2026.
Can I lose my home with a lifetime mortgage?
Plans meeting Equity Release Council standards give you the right to live in the property for the rest of your life, or until you move permanently into care, as long as it remains your main home and you keep to the terms of the contract, such as keeping it insured and maintained.
Will my children have to pay off the debt?
Not from their own money, if the plan has a no negative equity guarantee. The loan is repaid from the sale of the home, and if the proceeds fall short the provider absorbs the difference. Your estate will, however, receive less.
What is the difference between a lifetime mortgage and a retirement interest-only mortgage?
With a lifetime mortgage you usually pay nothing each month and the interest is added to the loan, so the debt grows. With a retirement interest-only mortgage you pay the interest monthly, so the debt stays the same, but the lender must be satisfied you can afford those payments throughout retirement.
When will the FCA’s changes happen?
The FCA expects to publish final mortgage rules, including on retirement interest-only lending, in the second half of 2026, and interim findings from its later life mortgages market study in the fourth quarter of 2026. Further work on later life lending continues into 2027.
Sources
- FCA, “Later life lending: building the fourth retirement pillar”, speech by Emad Aladhal, 16 June 2026
- FCA, “MS26/1: Later Life Mortgages Market Study”
- FCA, “CP26/18: Mortgage rule review, supporting first-time buyers and underserved consumers”
- Equity Release Council, “Equity Release market returns to growth with an increase in new customers”, 3 August 2026
- Equity Release Council, “Professional Standards & Guarantees”
- ONS, “Household total wealth in Great Britain: April 2020 to March 2022”
- GOV.UK, “Pension Credit: eligibility”
- FCA, “How to check a firm or individual is authorised”