The UK’s property wealth rose by £1.6bn each day on average (or £1m every minute) in 2021 to reach a record high of £6.7 trillion – equivalent to about £211,000 per household.
This property boom, combined with a growing number of equity release products on the market, saw the average equity release customer withdraw £125,000 from the value of their home last year, over seven years’ worth of the average pensioner’s income, after tax.
According to the Equity Release Council (ERC), which is the trade body for the equity release sector, the equity release market is now six times larger than it was a decade ago, growing from £789m to £4.8 billion in value. Product choice has also tripled in the last three years alone, from 202 equity release options in January 2019 to 662 in January 2022.
Although interest rates are slowly creeping up, over 300 equity release products on the market are still available at relatively low rates of 4% or less, with the average customer securing a rate of 3.39% on their loan in the second half of last year.
Many of these products offered penalty-free partial repayments and downsizing protection as part of the package, allowing homeowners greater flexibility and the chance to reduce their overall borrowing costs. Around 85% of products on the market allow partial early repayments, and since March, this feature has become a fifth customer safeguard as part of the Equity Release Council’s list of voluntary standards. Read more in our article New Equity Release Council safeguard could help millions of customers.
Meanwhile, the number of products offering downsizing protection, which enables customers to repay their loans in full early with no charges if they move home, increased to 63% in January 2022.
Equity release products can provide customers with a lump sum or regular income payments, so homeowners can use the funds as they wish.
David Burrowes, chair of the Equity Release Council, said: “After years of putting money away in bricks and mortar, older homeowners are turning the tables and taking funds from their homes in order to boost their retirement income, meet one-off costs and gift a living inheritance to their family.
“While many aspects of today’s market have been transformed in the 30 years since consumer safeguards were first established, firm foundations remain in place so no customer need ever worry about owing more than their home is worth and can rest easy in the knowledge they can remain in their home for life with no threat of repossession for not keeping up with repayments.
“As we move into an environment of growing cost-of-living pressures, the importance of rigorous advice will be greater than ever so that decisions to release equity continue to provide long-term satisfaction as well as short-term relief.”
You can read more about equity release and how it works in our equity release guides. For example, find out more about whether it might be suitable for you in our article Is equity release right for me?, and Equity release – what is it and how does it work?
If you’re looking for somewhere to start, you can get expert advice from an independent equity release specialist with Unbiased. They’ll listen to your needs and talk you through your options, so you can decide if equity release is the right option for you.