Equity release borrowers draw more than 7x income from their homes in 2021: ERC

With UK property wealth reaching a record £5.2 trillion by the end of last year, the equity release market saw customers withdraw £125,000 on average as a single lump sum or via incremental drawdowns.

The Council’s analysis shows this sum is equivalent to more than seven years of a single pensioner’s typical net income and nearly four years for the typical pensioner couple.

The report shows product pricing crept up year-on-year from 3.95% in January 2021 to 4.16% in January 2022. However, more than 300 products are now available at rates of 4% or less, while the average customer secured a rate of 3.39% on their loan during H2 2021.

The second half of the year also saw more products adding the option to make voluntary penalty-free partial repayments, with 85% of products allowing this in January 2022 compared with 68% in July 2021.

Overall, equity release lending activity for 2021 was six times greater than in 2011 (£4.8bn vs. £789m) with product choice having more than trebled in the last three years alone (665 in Jan 2022 vs. 202 in Jan 2019).

The Council’s analysis of wider property market activity shows the total value of UK housing reached £6.7 trillion at the end of 2021, rising by £1.6bn each day on average or £1m every minute.

When mortgage debt is discounted, it leaves the nation with an unprecedented £5.2 trillion of property wealth, equivalent to £211,000 per household.

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 family.

“With £1 million added to the value of UK housing every minute last year, the options afforded by property wealth will feature in many people’s thoughts as they make financial plans for the future.

“The equity release market’s return to growth is part of a wider pick-up in later life lending activity, and the flexible design of modern lifetime mortgages gives customers more ways to manage their finances and access life-changing sums of money at a lower cost.

“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.”