Soaring property prices combined with the cost of living crisis mean that growing numbers of homeowners are finding themselves asset rich but cash poor.
The average UK house price in June 2023 was £288,000 according to data from the Office for National Statistics, which is £5,000 higher than 12 months ago.
Average property prices in many areas of the UK have grown consistently over the past decade. In fact, homeowners who bought their house over 10 years ago have seen a whopping 66% average increase in their property price, despite the recent slowing of the property market.
This sounds like great news for homeowners as an increase in property value means the amount of equity you own in your property also increases. However, the reality for most of us is with money tied up in our property, we don’t actually benefit from any increase in value until we sell up. There are, however, a number of ways that you may be able to unlock some of your property wealth should you need to, without necessarily having to move home.
Has my property’s value increased?
The price of the average UK property increased by 1.7% in the year to June 2023, and while prices are rising faster in some regions than others, wherever you live there’s a good chance that your property has increased in value.
In the year to June, these were the average house prices by region and their percentage increases:
| Region | Price | Monthly change | Annual change |
| Northern Ireland | £173,898 | 1.40% | 2.70% |
| Scotland | £189,424 | -0.40% | 0.00% |
| Wales | £213,477 | 0.20% | 0.60% |
| East Midlands | £248,678 | 1.30% | 2.40% |
| East of England | £351,213 | 1.30% | 1.10% |
| London | £527,979 | 0.50% | -0.60% |
| North East | £161,034 | 1.80% | 4.70% |
| North West | £215,631 | 1.20% | 3.50% |
| South East | £391,406 | 0.60% | 1.30% |
| South West | £321,152 | -0.50% | 0.50% |
| West Midlands Region | £250,743 | 0.70% | 3.20% |
| Yorkshire and The Humber | £208,867 | 2.10% | 2.70% |
Office for National Statistics, UK House Price Index – June 2023
Of course, these are just averages, so if you want to get a more accurate estimate of what your property is worth now, property website, Zoopla has a handy property valuation tool you can use.
How can homeowners benefit from rising house prices?
While it may be reassuring to see that your house has risen in value, the only real way you’ll feel any tangible benefit from this increase in property wealth is if you either sell your property, or release some of your equity, either via equity release or remortgaging your home.
It’s important to note that none of these options should be entered into lightly, and there are plenty of pros and cons to consider first.
Of course, the right option for you will vary depending on your individual circumstances, but if you’re keen to benefit from your property’s rising price, there are four main options you may decide to explore:
Remortgaging
If your equity has increased, you have two main options when remortgaging.
First, you might decide you want to borrow more money, or second, you might use your increase in equity to get a better mortgage deal. Of course, with both options, you’ll be committing to paying monthly repayments and paying interest on any new borrowing, so it’s important to consider how you’ll afford these payments.
Remortgaging to borrow more
Remortgaging to borrow more might be a good way to make the most of your property’s increase in value if you need a lump sum of money now and are happy to make regular repayments against it.
You can choose to remortgage to borrow from your property whether you’ve fully or partially repaid your mortgage.
If you’ve fully repaid your mortgage already, and want to remortgage to release some of the equity, you’re in a strong position to do so, but your lender will want to know what you intend to do with the money, for example, whether you want to use it to make home improvements or to consolidate other debts. As you own the whole property, the rates you’ll be offered by lenders will really depend on how much you want to borrow, but they’ll often be more favourable than the rates they would offer someone who has only partially paid their mortgage.
If you’ve partially repaid your mortgage, when you remortgage to release equity you’ll be asking your current lender, or a new one, for more money than you currently owe.
It’s incredibly important to remember however, that this option isn’t just free money that you’ve taken out of your property. When you remortgage to release equity, you’ll essentially create a new mortgage that includes the extra money you’re borrowing. So while you may have a lump of cash now, you’ll be paying interest on this money, your monthly payments will likely go up and you’ll also drive down the amount of equity you own in the process.
If you are remortgaging to borrow more, and you’re already struggling to cover rising living costs, remember that mortgage providers carry out income affordability assessments which might restrict the availability of mortgages on offer and the amount you can borrow. They must also factor in any fall in income you might experience after you retire to check the repayments will still be affordable. Find out more in our guide Mortgages for over 50s: What you need to know.
If you’re looking for mortgage advice, you can speak to a Rest Less Mortgages advisor and get high quality advice on residential, retirement interest-only, equity release and buy-to-let mortgages.
Remortgaging to a better mortgage deal
Some people might choose to use the increase in their property value to bag a better deal when they remortgage. This might be a good option if you’re looking to get a better interest rate and make your monthly repayments cheaper. Find out more in our article Five good reasons to remortgage right now.
When it comes to remortgaging, if your property’s value has increased, so will your equity, meaning you own more of your property than before. So while you might still need to remortgage the same amount as before, your Loan To Value (LTV) will be lower, which means you might be able to get a better interest rate on your mortgage. The LTV is the ratio of the size of your mortgage against the actual property value. The best mortgage deals are usually available for people with LTVs of 60% or less, which means they are borrowing 60% of the property’s value, and have 40% in equity.
For example, if your property was initially valued at £100,000 and you took out a mortgage for £95,000, you would have had an initial LTV of 95%. Let’s say that your property’s value increases to £200,000, your LTV would have dropped to 47.5%, as you’d now have 52.5% in property equity, at which rate you’d probably qualify for some of the best deals on the market, provided you can meet lenders’ affordability criteria.
Whichever way you want to remortgage, it can be useful to speak to a mortgage broker before you make any decisions.
Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage. If you’re looking for somewhere to start, you can speak to a Rest Less Mortgages advisor and get high quality advice on residential, retirement interest-only, equity release and buy-to-let mortgages.
Downsize to a cheaper property
It’s not something everyone is prepared to do, but for some people, selling their home and downsizing can be a good way to unlock property wealth.
Of course, downsizing won’t work for everyone, especially if you’re already stretched for space. Most people living in larger family homes may only choose to downsize if their children have grown up and moved out. If you think downsizing could be a good option for you, our article Five questions to ask yourself if you’re considering downsizing your home has some key things you might want to consider before taking the plunge.
If you’re willing to relocate, you might find that you don’t have to settle for a smaller home. While property values have risen across the board, the average price for property varies hugely from region to region. For example, the average property price in London was £527,979, while properties in the North East cost an average of £161,034.
Whatever you decide to do is down to you, but it’s also important to remember the fees and costs that come with buying and selling properties. For more information on this have a look at our articles How much does it cost to move house and Mortgage costs and fees explained.
Equity release
If you own your home, but are struggling with cash and none of the above options are appropriate, for example, if you can’t afford to make monthly repayments, then equity release might be one option you decide to consider.
Equity release is designed for homeowners over the age of 55, and depending on the product you choose, it could provide you with a lump sum, regular income payments or a combination of both. Unlike a standard residential mortgage, where you usually pay back some of the capital and interest you owe each month, with an equity release plan, the money released and the interest that builds up on it is only paid back either when you die or move into long-term care.
If you want to see how much you might be able to release from your home and how much it could cost, this equity release calculator can give you an estimate. Fill in a few details to get an estimate.
Provided the equity release provider you chose is a member of the Equity Release Council, you’ll benefit from a ‘no negative equity guarantee’ which means you’ll never owe more than your house is worth. This is useful if house prices fall, as it’ll provide you with some protection. However, there are plenty of downsides to consider, not least that releasing equity from your property could reduce any inheritance you might have intended to leave significantly, and it might also affect your entitlement to means-tested benefits.
You can read more about the pros and cons of equity release in our articles Benefits of an equity release plan and Equity release – what are the risks?
The ins and outs of equity release can be tricky to get to grips with, and it’s a big financial commitment, so you should be fully comfortable with it before you commit. You can read more about equity release in our article Equity release – what is it and how does it work?
If you’re considering equity release, in the UK it’s currently a regulatory requirement from the Financial Conduct Authority FCA that you speak to a qualified financial advisor to ensure that it is suitable for your circumstances, and that you are making an informed decision.
It’s essential that you only use an advisor who is trained in equity release and can recommend a suitable product for you from a member of the Equity Release Council (ERC) to ensure that a number of minimum product standards are met, which help safeguard borrowers.
If you’re looking for somewhere to start, you can get expert advice from a Rest Less Mortgages equity release specialist. They are active members of the ERC and can advise on equity release mortgages from the whole of the market. 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.
Retirement Interest-Only mortgage
If you don’t want to sell your home and remortgaging would leave you with payments you can’t afford, then a Retirement Interest-Only (RIO) mortgage might be another option to consider.
RIO mortgages have become increasingly popular over recent years and are much like a standard mortgage insomuch as you can borrow a sum of money and are charged interest on this. The key difference is that RIO mortgages have no set term and are specifically designed for people over the age of 55. Unlike a standard mortgage, you’ll only pay the interest on the amount you borrow and will repay the capital borrowed when you move out or pass away.
This means that your monthly payments are likely to be lower, largely with the assumption that it will be more affordable on a retirement income. You can read more about RIO mortgages in our article How retirement interest-only mortgages work.
However there are a number of catches to be aware of when it comes to RIO mortgages which include:
- Getting approved for a RIO mortgage can be tricky – releasing large amounts of equity using a RIO mortgage could prove difficult if your lender doesn’t think you’ll be able to make the repayments once you retire.
- There’s no ‘no negative equity’ guarantee – while you might be able to borrow more while your property’s value is higher, if it falls you’ll still have to repay what you owe. You won’t be protected by a no negative equity guarantee as you are with equity release plans, so you may end up owing more than the property is worth.
You can read more about the pros and cons of RIO mortgages in our article What are the pros and cons of a retirement interest-only mortgage? and how they compare to lifetime mortgages in our guide What’s the difference between a lifetime mortgage and a retirement interest-only mortgage?
Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage. If you’re looking for somewhere to start, you can speak to a Rest Less Mortgages advisor and get high quality advice on residential, retirement interest-only, equity release and buy-to-let mortgages.
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