Equity release funded an estimated £3bn in retirement spending in 2021, according to a report by Legal & General and the Centre for Economics and Business Research (Cebr).
The report found that equity release approximately funds one in every £90 spent domestically by retired people.
Modelling by Cebr shows that total retirement spending funded by equity release could reach £4bn this year.
This comes after the share of total property wealth held by over 65s has increased from 28% to 37% over the past 12 years.
Cebr suggested that this, coupled with the rising value of homes in recent years, is driving more homeowners to consider the role that property wealth might play in supporting them financially in retirement.
One in 20 homeowners currently use equity release to fund retirement but this is anticipated to almost double to one in 10 (11%) based on the anticipated plans of younger homeowners.
Forecasts found that the average amount of equity released is set to rise above £170,000 within the next five years, despite an expected slowdown in housing market dynamics, resulting in a 47% increase on 2021 levels.
The total amount of equity released from property is expected to double by 2030 to over £12bn, as customer numbers increase and the average amount of equity released grows.
One in four retired homeowners (28%) cited having accessed their property wealth through a means other than equity release, for example, re-mortgaging, downsizing or taking out retirement interest-only mortgages.
Almost a third of this group accessed property wealth to finance home improvements or renovations.
Meanwhile, the majority of equity release spending by retirees is used for occasional big purchases such as home improvements, furniture or even a new car (£1.9bn).
Other uses for equity release include day-to-day expenses, such as food, clothes, transport and entertainment (£1.3bn).
The remaining equity used for spending (£480m) is estimated across international holidays and financial planning.
The report found that 26% of homeowners have frequently used equity release to finance home improvements.
Equity release is also used to support costs such as medical expenses (17%), maintaining living standards in retirement (16%) and paying off personal debt (16%), for example paying off interest only mortgages.
Data found that equity release is likely to play an increasingly important role in financing care-related expenses, with 19% of prospective homeowners citing it as a consideration.
Legal & General Home Finance chief executive Craig Brown says: “Our report highlights that homeowners are increasingly planning to use equity release or other ways of accessing property wealth to help fund later life.”
“This shift reflects the boom in property values, which have made our homes such an important asset, but it also demonstrates how far the equity release market has come through the introduction of product innovations and how it has become a more suitable solution for a wider range of people,” Brown adds.