How safe is equity release?

Is equity release safe? Protections, risks and what the Equity Release Council guarantees

Equity release can be a powerful tool for homeowners aged 55+ who want to unlock wealth tied up in their homes. Yet one question comes up more than any other: is equity release safe? The answer depends on regulation, industry standards and choosing the right product. This article explains how the Equity Release Council (ERC) protects consumers, the risks to be aware of, and the safeguards you should look for before committing.

What the Equity Release Council does to protect consumers

• The ERC sets industry standards that go beyond regulation
• Members include lenders, advisers and solicitors
• Standards focus on transparency, ethical practice and customer protection

How ERC membership reassures borrowers

The Equity Release Council is the UK’s main regulatory standards body for later-life lending. Its members commit to strict rules designed to protect older homeowners throughout the lifetime of a plan.

The ERC states that:

These standards cover advice quality, product design, communication and after-sales support. Homeowners using ERC-approved advisers and lenders benefit from an extra layer of protection above standard FCA regulation.

The ERC’s core protections:
What you are guaranteed as a customer

• No negative equity guarantee
• Lifetime right to remain in your home
• Freedom to move house where criteria are met
• The right to make voluntary penalty-free repayments (subject to product rules)

The safeguards built into modern equity release plans

Plans from ERC-member providers must include several guarantees that protect borrowers from the biggest historical risks of equity release.

The no negative equity guarantee ensures you will never owe more than your home is worth when it is sold. You also maintain a lifetime right to stay in your home, provided it remains your main residence. Many products allow you to move home when suitable, and most now offer the ability to make voluntary repayments to manage the loan balance.

These commitments are designed to make equity release more flexible and safer than in previous decades, while helping families avoid unaffordable debts passed to their estate.

Regulation and legal protections:
More than just industry standards

• Equity release is fully regulated by the Financial Conduct Authority
• Customers must receive independent legal advice
• Advisers must follow strict suitability and disclosure rules

How regulation keeps equity release safe

All equity release products in the UK fall under the Financial Conduct Authority’s regulatory framework. This means every lender and adviser must meet strict rules on conduct, suitability assessments, product transparency and customer support.

ERC standards reinforce regulation by requiring that every customer receives independent legal advice before proceeding. This ensures you fully understand the long-term implications of releasing equity and that the contract is explained in plain language by a qualified solicitor.

Together, the FCA’s regulatory oversight and the ERC’s additional requirements create a robust safety net to prevent mis-selling or unsuitable recommendations.

Recent updates:
ERC standards strengthened for 2025

• New Consumer Charter
• Updated product standards for greater transparency
• Additional protections for customers entering long-term care

Why these updates matter for borrowers

In 2025, the ERC strengthened its product standards to offer clearer consumer protections and improve long-term fairness. Updates included a new Consumer Charter and a refreshed set of standards focusing on transparency, communication and customer outcomes.

One of the most notable additions is a standard protecting customers who move into long-term care. This helps ensure the plan remains fair and manageable during life events that can significantly affect finances.

These improvements show how the industry continues to evolve, with a growing emphasis on consumer protection and ethical practice.

The risks of equity release:
What borrowers should consider

• Compound interest can reduce the value of your estate
• Fewer assets may be available for inheritance
• May affect entitlement to means-tested benefits
• Early repayment charges may apply

Understanding the trade-offs

Equity release carries real, long-term financial implications, even with strong protections.

Interest often compounds for many years, especially if you choose not to make repayments. This can significantly reduce the amount left in your estate. Releasing equity may also affect your eligibility for means-tested benefits, depending on how the funds are used.

If you repay early or choose to switch products, early repayment charges can apply. While many plans now offer partial repayment flexibility, you should always check the details before proceeding.

Because of these factors, some impartial organisations advise considering equity release only after exploring alternatives such as downsizing, reviewing pensions or using other savings.

How to make equity release safer:
What you should check before agreeing to a plan

• Use an ERC-member adviser and lender
• Insist on clear, personalised advice
• Review repayment options and long-term scenarios
• Understand the impact on inheritance
• Compare alternatives

Steps to ensure the plan suits your needs

If you decide to explore equity release, several actions can help make the process safer:

Choose an ERC-member adviser or lender, as they must follow higher standards of conduct and product design. Ensure you receive personalised advice tailored to your financial situation, including how the plan affects your estate and future care needs.

Review repayment flexibility carefully, including voluntary repayments, early repayment charges and the option to port the loan if you move home. You should also compare equity release with other options such as downsizing or pension adjustments.

By taking a thorough, cautious approach, you can reduce risks and ensure equity release works for your long-term goals.

Conclusion

Equity release can be safe when you use reputable, ERC-member providers and receive regulated, independent advice. Modern protections such as the no negative equity guarantee, lifetime home rights and improved product flexibility help reduce historic risks.

However, equity release remains a significant financial commitment. Understanding the long-term consequences, including interest build-up and reduced inheritance, is essential before proceeding. By combining expert advice with the protections offered by the Equity Release Council, you can make a more confident and informed decision.