UK mortgage repayments jumped by 20% to a record £38bn in the first half of the year compared to 12 months ago, according to the Equity Release Council.
Debt payments were fuelled by regular repayments and record overpayments, new borrowing ahead of the stamp duty deadline and fewer mortgage payment holidays, as customers began to get their pre-pandemic plans on track.
This unprecedented paying down of debt is the equivalent to £200m a day or £3,500 for every mortgaged household, says the trade body’s Autumn 2021 Market Report.
However, the country is now carrying over £1.5tn of mortgage debt for the first time on record, but the report points out that factors such as rising house price rises mean for every £1 of mortgage debt, there is more than £3 of equity in UK homes.
It adds that the overall value of the nation’s housing stock has risen from £5.67tn to £6.42tn over the last year, with private property wealth reaching a new high of £4.87tn.
Rising property prices means 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 for its owner to draw on, the survey says.
The total number of equity release products on the market jumped to a record high of 668 in July, from 448 six months earlier.
The survey adds that the number of products for consumers to chose from has more doubled, rising by 127%, compared to two years ago.
The average equity release rate “crept up modestly to 4.26%”, but the report points out there are still more options in the market with rates of 4% or lower than a year ago.
The report adds that new equity release customer levels remained broadly consistent with those seen in the first half of 2020, dipping slightly from 21,917 to 21,596 new plans taken out, but higher than this time last year when the first lockdown slowed activity to 18,420 new plans.
The average house price of new customers continues to rise to record levels for both new drawdowns, at £419,166, and lump sum plans, at £406,139.
This comes as UK property prices lifted over the last year hit an average of £265,668.
The average age of new customers remained stable in the first six months of this year at 70 years old for new drawdown customers 68.4 for new lump sum customers.
Equity Release Council chairman David Burrowes says: “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.”
Canada Life head of marketing, insurance Alice Watson adds: “The UK’s love affair with property remains resolute and despite the pandemic the amount of borrowing being paid down is at record highs.
“This conversion of borrowing into property wealth, combined with rising property prices has led to UK households amassing property wealth of nearly £5tn.
“Property ownership provides significant opportunities for financial planning.
“Property wealth will increasingly be used as another element of retirement income, and will continue to be a way of funding the individual life ambitions and goals that we all work for.
“The equity release market has stepped up with more flexible solutions and will continue to adapt and evolve to ever-changing customer needs.”
Just Group group communications director at retirement specialist Stephen Lowe says: “This is another upbeat report showing stability returning after the turmoil of the pandemic and it bodes well for growth as people who postponed major financial decisions get their plans back on track, whether they are looking to release lump sums, gift money, generate extra income or pay for care.
“Historically low interest rates and high levels of competition between providers is driving innovation.
