While the level of mortgage debt has reached above £1.5trn, fast rising property prices mean that for every £1 of mortgage debt, there is more than £3 of equity in homes
The overall value of UK housing stock has increased 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 above £1.5trn, fast rising property prices mean that for every £1 of mortgage debt, there is more than £3 of equity in homes.
This rise in property value has fuelled a rise 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 over 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 dropped to 3.95% earlier in the year, average interest rates are now 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.
He said: 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.
