Property owners gained over £46,000 of equity since Summer 2020, according to the Equity Release Council’s (ERC) Autumn 2022 market report.
Buoyed by strong demand for property, the ERC found that UK housing stock has reached a combined valuation of £7trn, pushing annual house price growth to 12.8% in May 2022.
The findings also state that even though over £100bn of extra mortgage debt has been taken on over the last two years, rising prices have increased owners’ equity to such an extent that the average loan-to-value of 22.8% is the lowest since before the 2007/8 crisis.
David Burrowes, chair of the Equity Release Council, said: “Rising house prices have meant that, while mortgage debt has grown, it is secondary to vast reserves of housing equity which can help multiple generations to achieve financial security by giving them more options and choices in managing their money.
“Equity release should neither be a default option or last resort; it should routinely be considered, alongside potential alternatives, with both short and long-term financial goals in mind.”
According to the report, over 100,000 new and returning customers may use equity release products during 2022 to tap into this wealth if current trends continue, with customer numbers up by 32% year-on-year in H1.
Full-year data for 2017 and 2021 shows that, with the use of lifetime mortgages growing across every UK region, Wales and the North-West have seen sales volumes increase the most over the last four years with every region across the Midlands and North seeing at least 26% growth.
The report also highlights the important role played by advisers – particularly in the current unstable economic climate.
Due to cost-of-living pressures, advice is vitally important to ensure products are suitable for both short and long-term needs and the Council’s Checklist for Advisers aims to set out the most important points that customers should consider during the mandatory process of qualified financial and independent legal advice that precedes any decision to release equity.
Reaction
Will Hale, CEO of Key:
“With an estimated £3trn of unencumbered housing wealth in the UK in the hands of the over 65s, this makes perfect sense as customers look to all their assets to help navigate the current challenges that the cost-of-living crisis is causing many households.
“Advisers have an important role to help people understand all their options and the potential impact of choices made over both the long and the short-term. Equity release is now an accepted part of normal retirement planning for a wide range of different customers.”
Stephen Lowe, group communications director at retirement specialist Just Group:
“The majority of housing wealth in the UK is owned by the over-55s and, since the pandemic restrictions eased, there has been a strong bounce back in the numbers looking for ways to access it to underpin their financial aspirations in later life.
“We expect increasing numbers of people to become aware of the possibilities of releasing equity, to provide extra income or generate lump sums, for helping people gift money to family and plan for inheritances.”
Simon Gray, managing director at equity release advisory firm HUB Financial Solutions:
“Where equity release is the best solution for a client it is important they are clear it is a long-term commitment with long-term implications that are best understood by everyone involved.
“Today’s market is vibrant with more product options and intense competition which is delivering value for money for clients. Potential borrowers will need the help of highly professional, knowledgeable and regulated advisers.
“It is crucial to first understand a client’s situations and requirements and then seek out the most suitable solutions. Current uncertainties reinforce this need for specialist expertise to ensure plans remain suitable through economic gyrations that may lie ahead.”
