Maximising your home equity

In recent years, homeowners in England and Wales have seen a significant increase in home equity. According to data, homeowners in England and Wales could unlock the equivalent of five years’ worth of retirement income through equity release[1].

This is due to an impressive 22% surge in median house prices since 2017, translating to an average rise of £12k in just five years. This equity growth could allow homeowners to tap into their home’s value and bolster their retirement income if appropriate.

CONSISTENT GROWTH IN HOUSE PRICES

Wales, in particular, has witnessed a staggering rise in house prices, which are growing three times faster than the national average. As a result, homeowners in Wales are experiencing the most substantial potential growth. Up to September 2022, the latest ONS data indicates that despite market volatility, there was still an average increase of 2% over the last year.

This consistent growth in house prices means that homeowners could access an average of £67,200 via equity release. This sum equates to five years of retirement income, highlighted in the PLSA’s ‘Retirement Living Standards’ report published in January 2023.

MOST SUBSTANTIAL INCREASES

Equity release provides a tax-free income stream, with repayment only required when the last homeowner passes away or moves into long-term care. The data shows that homeowners in Wales have seen the most substantial increases in potential equity release, with an average rise of 6% in the last year and 32% over the past five years. Local authorities with the most significant growth in potential property wealth include Blaenau Gwent (51%), Leicester (45%) and Manchester (43%).

MOST VALUABLE ASSETS

For many homeowners over 55, their property remains one of their most valuable assets. Therefore, it’s unsurprising that an increasing number of individuals are considering how their home equity could contribute to their long-term financial planning. While equity release may not be suitable for everyone, it can significantly impact retirement, making exploring all options with a qualified professional financial adviser essential.

Whether downsizing to free up funds or to release money tied up in your home through products like lifetime mortgages, planning how your property could play a role in your financial future is becoming increasingly common.

Don’t forget, our professional friendly advisors are on hand to support you and can help you explore all of your options.

Source:

[1] The average equity release customer accessed 24% of the value of their home in 2022, according to Legal & General Home Finance data. Based on average property values across local authorities in England and Wales as per Office for National Statistics, House price statistics for small areas in England and Wales: year ending September 2022 (released March 2023), this would mean a median average of £67,200 worth of equity could be released from a property, 30/05/23. According to the PLSA’s most recent ‘Retirement Living Standards’ report published in January 2023, the minimum standard of income for a single person (living outside London) is £12,800 per annum. These are current figures at the time of publication but are subject to review annually. The comparison with property wealth assumes no Income Tax is payable, as the amount released from equity release is tax-free.