The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

But as people in the UK live longer and wealth increasingly accumulates among the older generation, could we now see the emergence of the ‘Bank of Grandparents’ helping first-time buyers get onto the property ladder?

In this blog, we explore how the Bank of Grandparents is becoming a reality, with older homeowners using equity release products in new ways to support younger family members as they take their first steps into the housing market.

Mobility issues in the UK housing market

Availability and affordability of suitable housing at all levels of the property ladder have long been key challenges for the UK housing market.

Set in the context of the UK’s ageing population, these issues only intensify.

As people live longer, older generations are remaining in their homes for more years. This reduces housing market mobility, since many older residents occupy larger family homes – homes that are in high demand from growing families and first-time buyers. As a result, younger generations face even greater obstacles to affordability and access.

But, what if there were a way to improve affordability without forcing older adults out of their homes?

How equity release is helping first-time buyers on to the ladder

Over-65s currently hold ~£2.3tn in property wealth in the UK, with 75 per cent of this age group owning their homes outright. Tapping into even a small proportion of this equity could have significant ripple effects, benefiting homeowners, stimulating the wider housing market, and supporting broader economic growth.

Growing demand for equity release

Equity release is growing in popularity among later-life homeowners. Many use it to unlock wealth tied up in their property, whether to supplement pension income, adapt their homes for changing needs, or fund their lifestyles.

The market has seen remarkable growth: demand for equity release products has grown by 32 per cent in the last year alone, and the overall market tripled in the 10 years to 2022.

A new equity release use case

In an environment where liquidity in the housing market is lacking, more older homeowners could help address this by creating greater mobility through releasing equity. The ‘Bank of Grandparents’ could see an increase in older homeowners, who do not need additional cash for their own lifestyles, releasing equity from their home to gift to younger family members to get them started on the housing ladder.

In doing so, allowing them to stay in their home and enabling younger generations to make productive use of their inheritance sooner.

This model for equity release may also support estate planning and inheritance tax (IHT) through gifting wealth to family during the homeowner’s lifetime.

Improving house affordability is just one part of the solution

We recognise that using equity release to support younger family members is mainly reserved to wealthier demographics who hold sufficient property equity for this model to work.

It also important to note that improving affordability for younger generations is only one part of the solution. Improving the supply and ensuring the availability of the right kind of homes for all homebuyers is the keystone to creating a liquid and inclusive housing market in the UK.

While using equity release in this way has the potentially to address some of barriers to the proper functioning of our housing market, only by stimulating both demand and supply can we transform the system to work for everyone.

This use case is just one of the recommendations in our upcoming report, The Generation Gap, which examines the impact of the ageing population on UK homeownership and explores how mortgage providers, policy makers, and the wider population can collectively work together to create a housing market that meets the needs of all generations.