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UK Equity release market smashes £2bn milestone

Pensioners released a record £2.1bn of property wealth in 2016, new figures have revealed.

A market monitor from over-55s finance specialist Key Retirement found that the total value of property wealth released in 2016 grew 26% on the previous year, marking the fifth consecutive year of growth for the equity release market.

The equity release sector has now more than doubled in size since 2011.

Dean Mirfin, technical director at Key Retirement, said: “…Property wealth is making a huge contribution to retirement planning.

“Rate cuts across the market and the launch of new solutions demonstrates that the market is responding to the growing need for alternatives to traditional retirement income solutions which are being squeezed by historically low interest rates.”

During 2016, the number of homeowners using equity release to boost their retirement finances rose 17% to 27,666.

Seven out of 12 regions in the UK reported growth in the value of equity released, with East Anglia and London experiencing a 67% and 43% increase respectively.

Homeowners in the capital released on average £142,999 at an LTV of 23%.

Meanwhile, the average retired homeowner in the UK accessed £77,877 from their property, up 8% on the previous year.

Some 22% of customers put these funds towards mortgage repayments.

“The average amount being released by retired homeowners at nearly £78,000 underlines that property wealth can help with a number of issues for customers, ranging from improving their homes and going on holiday to helping family and clearing debt,” Dean added.

“…With 2017 being the start of the first major wave of interest only mortgage maturities, we expect demand from those with a shortfall to repay the capital, or no means at all, to turn to equity release as a solution which will further drive demand.”

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UK House price inflation rising ten times faster than pensioner incomes

House prices in England have grown to almost 10 times the size of the average pensioner’s yearly income over the past 20 years, findings from the Equity Release Council reveal. Analysis of Office for National Statistics data between 1994/5 and 2014/5 showed that the average house price in England has rocketed by 148% from £82,100 to £203,360. Despite such gains, pensioner household income rose by just 66% in comparison to total £21,026 a year in 2014/15.


Events like the 2008/09 financial crisis have meant that growth in house prices relative to pensioner income has not been linear, the research showed. House prices in the mid-2000s were almost 12 times higher than the average pensioner income, before narrowing to 9.4 times in the aftermath of crisis.


Nigel Waterson, chairman of the Equity Release Council, said the findings had “game-changing” implications for the use of housing equity to fund their retirement.


“While the growth in house prices has not been linear or universal, strong market fundamentals mean housing equity is likely to remain a sizeable asset for the foreseeable future. It means housing wealth has an indispensable part to play in all discussions home owners have about financial well being in retirement,” he said.


“Government must act to encourage people to think through their options holistically, rather than focusing exclusively on savings and overlooking other choices that could boost their prospective retirement income.”
House prices have also outpaced the growth of pensioner investment income which has fallen 20% over a 20-year period, state pension income which has risen 59% and income from private pensions/annuities which has recorded growth of 114%.


Waterson added that the significant growth in house prices meant many pensioners who own their home have been effectively investing in an asset which could boost their income for later life.
He said: “With economic turbulence affecting investment returns and putting government finances under added pressure, housing equity is likely to be an increasingly important source of income for pensioners for years to come.”