Lifetime Mortgages

Property wealth and retirement planning

October 22, 2021
Information published was correct at the time of writing

Equity release options rise to meet pension shortfalls

Many over 55s in the UK have concerns about whether they can afford to retire and live the lifestyle they want because they lack pension savings. Yet, UK private property wealth has recently reached its highest-ever levels, meaning that the average homeowner has more wealth than they may realise. Unlocking that wealth could change your retirement plan entirely. Towards the end of 2020, the total value of property in the UK passed £6 trillion to reach a record high. While most private owners buy with the help of a mortgage and therefore don’t own 100% of their home, the equity that owners do hold also reached its highest levels.

The average loan-to-value of a UK mortgage fell to 24.6% (meaning that the average owner holds equity of over 75% in their property). So, the total value of private property wealth in the UK reached £4.6 trillion. People in older age groups tend to hold more property wealth than those in younger age groups, simply because they have spent longer paying off their mortgages. Due to changes in the way pension income can be taken, combined with increasing life expectancies, many savers are no longer able to rely on their pension savings alone to meet their income needs throughout their retirement. For people aged over 55 who face a shortfall in pension wealth, property wealth is becoming integral to retirement planning.

There are a number of options for people aged over 55 to unlock the value in their home. Equity release products allow you to borrow money against your property, with no repayments to make during your lifetime. Typically borrowers can access up to 60% of the value of their home, and after their death, the property will be sold to repay the loan. Any profit (after the loan, interest and fees are paid) will be passed to their loved ones.

Similarly, retirement interest-only mortgages allow people to borrow money against their property and repay only the interest due. The capital is repaid after their death, along with the fees, and again, any profit can be passed to loved ones. There are options to allow voluntary partial capital repayments during your lifetime. This can be helpful if circumstances change, and you’d prefer to pass more of your property wealth to your children, for example.

We are proud members of the Equity Release Council.

Equity Release Council

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