Rising house prices have pushed the overall valuation of the UK housing stock to a record £7 trillion, according to the Equity Release Council.
The later life lending body says the country’s stock of homes hit that level after annual house price gains hit 12.8% in May as “strong demand” continues to boost prices.
It adds that over the last four years the take up of equity release has grown across the UK with the largest increases in Wales, lifting by 40%, the North-West, up by 38% and West Midlands, up by 31%.
While UK households have collectively taken on over £100bn of extra mortgage debt over the last two years, rising prices have continued to increase the equity in these homes, says the body’s Autumn 2022 Market Report.
It adds that 22.8% of the average UK property is now owned through mortgage debt – the lowest figure since before the 2007/8 banking crisis – with the remaining 77.2% owned in equity or cash.
The report points out that homeowners and landlords have gained the equivalent of £46,000 equity per household since the summer of 2020.
Like many borrowing products, these home loans have risen along with Bank of England base rate hikes, with the average equity release product rate lifting to 5.74% from 4.10% between the start of the year and August, says the study.
It points out that just four complaints about equity release products were upheld according to the Financial Ombudsman Service in the first half of this year.
The report adds that seven out of ten equity release complaints to the Financial Ombudsman Service come from family members or an executor, rather than the customer.
The later life body “urges anyone considering releasing equity from their home to include family members or those close to them in their decision, wherever appropriate”.
Equity Release Council chair David Burrowes says: “Releasing equity continues to evolve from having been an outlier to being embraced as a nationwide trend, with modern flexible products helping to meet a variety of needs.
“Rising house prices have meant that, while national 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.”
Key chief executive Will Hale points out: “On occasions, I have seen commentary regarding equity release being London-Centric or something that only those in the South can benefit from.
“Today’s figures from the Equity Release Council clear up that misconception and highlight that housing equity is being used across the country to repay mortgages, help families and improve retirement income.
“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.”
HUB Financial Solutions managing director Simon Gray adds: “When providing advice on equity release consumer protection is the highest priority, so we fully support the council’s call for potential clients to involve their family in the decision-making process where appropriate. This is something our advice team actively promotes.
“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.”
Just Group group communications director Stephen Lowe says: “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.
“The ability to tailor plans to meet a wide range of requirements is delivering solutions that can fulfil each client’s unique needs.
“Providers are competing hard with a host of flexible features such as drawdown facilities, repayment options, inheritance protection, interest-servicing and medically underwritten rates.”
