The overall value of UK housing stock has risen from £5.67trn to £6.42trn over the last year, with private property wealth reaching a new high of £4.87trn according to figures released by the Equity Release Council.
While the level of mortgage debt has reached unprecedented levels, now above £1.5trn, fast rising property prices mean that for every £1 of mortgage debt, there is more than £3 of equity in our homes.
And the national lockdowns turned borrowers into a nation of savers as households repaid more than £19bn of mortgage capital during both Q1 and Q2 2021, having never repaid more than £18bn in any previous quarter.
This increase in property value has fuelled an increase in equity release as homeowners take the opportunity to draw on equity to meet later life financial needs. The Equity Release Council figures suggest that more than three quarters of the value of the average home is tied up in equity rather than debt, leaving £201,642 of property wealth potentially available.
Looking specifically at the equity release market, the ERC’s figures show that across the first half of 2021, 35,860 new and returning customers unlocked £2.3bn of property wealth.
The wider availability of product options, nearly double the number available just 2 years ago, has seen customer numbers steadily rise with June 2021 seeing the most new plans agreed (3,348). Having fallen to a low of 3.95% earlier in the year, average interest rates now sit around 4.26%.
David Burrowes, Chairman of the Equity Release Council comments:
“UK households are converting unprecedented amounts of mortgage borrowing into property wealth as we look to move on from the worst of the pandemic. Combined with property price rises fuelled by the Stamp Duty holiday, homeowners have record equity to potentially draw upon in later life.
“The transformation of later life mortgages in recent years has given people more opportunities to access their biggest source of wealth. We are seeing mindsets change to the point that tapping into property wealth is now a common consideration to meet various retirement needs, from topping up pension income to providing a ‘living inheritance’ via gifting to younger generations.”
“The modern equity release market has shown resilience in the face of uncertainty to climb back towards pre-pandemic levels. The disruption of the last 18 months has not slowed the pace of innovation in lifetime lending, and it is important the market continues to evolve to address the financial challenges people will face in the post-pandemic world.”
Claire Singleton, CEO of Legal & General Home Finance adds:
“The news that UK property wealth has reached new highs of £4.87trn means homeowners have even greater opportunities to use the equity built up in their home. Products like lifetime mortgages can help people enjoy the retirement they want, whether that’s using equity to pay off an existing mortgage, to be able to stay somewhere they love; to top-up their retirement income, carry out home improvements or to enjoy occasional luxuries, like a new car or holidays abroad.
“We know that increasing choice and innovation, including products that allow interest to be paid back monthly, are making lifetime mortgages much more of an everyday option for many people. We’re also seeing an increase in families using equity release to be able to provide a living inheritance to younger generations as and when they need it, for example, to help buy a first home.”