Mortgage Arrears Are Falling — What a Healthier Market Means for Equity Release in 2026

What the UK Finance data shows

UK Finance's Q1 2026 mortgage arrears data makes for broadly positive reading. There were 79,110 homeowner mortgages in arrears at the end of the first quarter — a fall of 12% compared to the same period in 2025. At 0.91% of all homeowner mortgages, the arrears rate sits well below long-term historical averages. Possessions stood at 1,250 for the quarter — slightly up on very low recent figures, but far below the peaks seen in previous economic cycles.

These are encouraging numbers. They suggest that despite elevated interest rates, higher living costs, and economic uncertainty, the majority of UK homeowners have managed their finances with considerable resilience. That resilience is particularly notable given that many borrowers have been rolling off fixed-rate deals onto higher rates over the past two years.

The profile of equity release customers — and why this matters

The typical equity release customer is not someone in financial difficulty. Most are homeowners who are mortgage-free, or close to it, who have accumulated significant property equity over decades of ownership. They are looking to access that equity to improve their retirement finances — not to rescue themselves from arrears.

The falling arrears data is a useful backdrop because it reinforces the overall financial health of older homeowners as a group. Property has been preserved as an asset even as savings and investment returns have come under pressure. For this cohort, property wealth is often the largest and most intact financial resource they hold — and equity release is the tool that allows them to access it without selling.

That said, a growing number of homeowners are carrying mortgage balances into retirement. Equity Release Council data has highlighted this trend. For these households, a lifetime mortgage can serve a dual purpose: paying off the outstanding repayment mortgage and eliminating monthly mortgage payments in one step, improving cash flow immediately and significantly.

Property wealth in context: the asset that has held its value

While mortgage arrears are falling, separate data from St. James's Place paints a more mixed picture of household finances overall. Average UK household wealth excluding property fell from £126,482 to £104,329 in 2026 — a drop of £22,153, or 17.5%. Savings, investments and liquid assets have come under pressure from rising costs, lower returns, and the general squeeze on household budgets.

Property has fared better. Average UK house prices remain above £280,000 despite modest market softness, and the medium-term outlook remains positive. For older homeowners, this divergence between declining financial assets and relatively stable property values reinforces the case for considering property as a retirement resource — not just something to pass on.

How equity release can help avoid financial strain in retirement

The homeowners who are managing their finances well today — the 99% not in arrears — are not immune to future pressure. Retirement brings a transition from earned income to fixed income, and the gap between what pensions provide and what a comfortable retirement costs is well-documented. Planning ahead, while finances are stable, is considerably less stressful than acting under pressure later.

Key ways equity release can support retirement financial health include:

• Supplementing pension income to reach a comfortable — not just minimum — retirement standard
• Paying off an outstanding repayment mortgage, removing monthly payments entirely
• Funding home improvements that reduce ongoing costs or adapt the home for later life
• Providing a financial buffer against unexpected costs — care, health, or family needs

FCA-regulated advice is a legal requirement for equity release. Verity Home provides whole-of-market advice, meaning we compare products from across all available lenders to find the right plan for your circumstances.