"Combined with property price rises fuelled by the stamp duty holiday, homeowners have record equity to potentially draw upon in later life."
A strong performance in the housing market saw UK private property wealth increase from £4.21 trillion at the end of H1 2020 to an unprecedented £4.87tn at the end of H1 2021, according to figures from the Equity Release Council.
UK mortgage capital repayments have increased by 20% year-on-year, bringing the total amount of debt repaid in the first half of 2021 to an unprecedented £38bn – equivalent to £200m a day or £3,500 for every mortgaged household.
The trend has been fuelled by regular repayments and overpayments reaching record highs, new borrowing ahead of the stamp duty deadline and fewer mortgage payment holidays.
The nation is now carrying over £1.5trn of mortgage debt for the first time on record, but factors including house price rises means more than three quarters of the value of the average home is tied up in equity rather than debt, leaving an average of £201,642 of property wealth for its owner to draw on.
With the annual rate of UK house price growth having been above 7% since January 2021, a customer paying 6% interest could have seen their property equity grow faster than their loan, while a customer paying 3% interest could have seen their equity grow more than twice as fast.
Additionally, lifetime mortgage product options have doubled in the last two years which, combined with low rates and flexible features, increases the appeal of using equity release to help meet later life financial needs.
Across the first half of 2021, 35,860 new and returning customers were served, unlocking £2.3bn of property wealth to support their finances. Customer numbers steadily rose in H1 2021 with June seeing the most new plans agreed (3,348).
David Burrowes, Chairman of the Equity Release Council commented: “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.”