House price recovery boosts UK homeowners’ equity to a record £5.7trillion

The UK’s house price recovery has boosted UK homeowners’ equity to a record £5.7trillion, according to the Equity Release Council (ERC).

The ERC’s analysis shows:

• • UK property currently leveraged at its lowest rate since before the 2007/8 crisis
  • Almost four fifths (78%) of the average property is owned in cash with over-55s homeowners holding an average of £321,213 worth of equity in their homes
  • Over-55 homeowners collectively own £3.4trillion of property wealth – more than 22x the Government’s annual spending on pensioner benefits in Great Britain

Recovering house prices in the first half of 2024 have boosted the total value of the nation’s property equity to an unprecedented £5.7trillion, according to analysis by the Equity Release Council.

The Council’s research looks at the untapped potential of property wealth to help support the UK’s ageing population at a time when public sector funds are squeezed.  The record £5.7tn figure surpasses the previous high of £5.6tn from mid-2022, when the housing market was buoyed by pent-up demand after the pandemic.

Total UK mortgage debt of £1.6tn compares with an overall property market value of £7.3tn. This gives an average loan-to-value (LTV) of just 22.2%, with the remaining 77.8% of the housing market effectively owned in equity or cash.

The average LTV has dropped from 28.9% ten years ago, and means for every £10,000 of property owned, £7,720 is backed by cash with mortgages covering only a minor share.

Over-55s’ property wealth dwarfs Government’s pensioner welfare budget

Government data shows more than half (55%) of homeowners in England are aged 55+ and 76% of over-55s own their own home. The Council’s analysis indicates the average over-55 owner-occupied household in the UK has £321,213 of equity in their home.

While the most property-rich regions are concentrated in the south of England, every region and constituent country of the UK is home to significant reserves of housing wealth among its older population, which add up to more than £3.4tn in total.

Table 1: Regional property wealth among over-55 homeowner households:

Source: Equity Release Council analysis of Government and Bank of England data

Nationally, the findings mean over-55 homeowners in Great Britain own property wealth worth more than 22 times the £152bn which the Government will spend on Britain’s pensioner benefits during 2024/25, according to the Office for Budget Responsibility (OBR).

For households, the £321,213 of equity in the average UK over-55 homeowner’s property is worth almost 10x the average pensioner couple’s annual net income of £38,168. The contrast highlights how private property wealth can play both a personal and policy role to help meet later life living costs and welfare needs for the UK’s ageing population.

Having been hit hard by post-pandemic inflation, many older households face losing access to winter fuel payments this year as the new Government brings in means-testing to help manage the public finances.

Lifetime Mortgages which are the most common type of equity release plans allow over-55s to access the equity tied up in their homes via a highly regulated product that can only be sold with advice and includes additional safeguards such as a no-negative equity guarantee and guaranteed tenure for life.

Jim Boyd, CEO of the ERC, comments:

“While we haven’t seen double digit growth in house prices this year, we have seen the property market start to recover which has pushed the total value of unmortgaged residential property in the UK to over £5.7 trillion.

“Much of this is in the hands of the older generation and our findings make it crystal clear that your prospects of living comfortably in retirement will rest on firmer foundations if you own your own home and include property wealth in your financial plans.

“Spare funds aren’t easy to come by in the current climate, either for households or for Government so it’s vital that we help older homeowners consider the role that the £3.4 trillion worth of property wealth can play in later life finances.

“Whether it is boosting income, managing unsecured debt, paying for care or helping to get family members onto the property ladder, there is a huge amount of potential tied up in bricks and mortar.

“Financial advisers need to ensure that when they are speaking to their clients, the role of property is discussed – even if the right approach is ultimately to look at other options. 

“We need to encourage informed choices rather than simply relying on what works for previous generations.

“We urge the new Government to look beyond pensions to improve retirement incomes and stimulate the economy.

“There is a compelling need for Government to set out its vision for property wealth in later life funding: a thriving later life mortgage market can help to achieve both of these outcomes.”

Kindly shared by The Equity Release Council (ERC)