Lifetime mortgage popularity growing in every UK region: ERC

Over the last four years, Wales (50%), the North-West (38%) and West Midlands (31%) have seen the biggest increases in the number of older homeowners using equity release products to access money from their homes.

Analysis of regulatory data shows every region across the Midlands and North of England has seen at least 26% growth in the uptake of lifetime mortgages since 2017.

The trend comes as the Council’s analysis shows rising house prices have pushed the overall valuation of UK housing to a record £7 trillion, after annual house price gains hit 12.8% in May.

While UK households have collectively taken on over £100bn of extra mortgage debt over the last two years, rising prices have continued to increase the equity at their disposal.

As a result, just 22.8% of the average UK property is now owned via mortgage debt – the lowest figure since before the 2007/8 banking crisis – with the remaining 77.2% owned in equity or cash.

Property owners, including homeowners and landlords, have gained the equivalent of £46,000 equity per household since summer 2020.

Like many borrowing products, equity release loans have been impacted by rising interest rates so far in 2022. The average product rate rose from 4.10% to 5.74% between January and August.

However, this increase was more modest than for many other types of mortgage product over the same period. The Council’s data also shows the average new customer secured a lower rate of 3.71% in H1 2022 after taking financial advice to assess their needs, options and alternatives.

Almost nine in ten products (89%) now come with fixed ERCs and the majority of products offer compassionate repayment windows – typically allowing three years after an event such as bereavement to repay the loan early with no ERC – while 63% provide downsizing protection, allowing ERC-free repayment if the customer moves to a smaller home.

David Burrowes, chair of the Equity Release Council, said: “Our Autumn 2022 report shows releasing equity continues to evolve from having been an outlier to being embraced as a nationwide trend, with modern flexible products helping to meet a variety of needs.

“Rising house prices have meant that, while national mortgage debt has grown, it is secondary to vast reserves of housing equity which can help multiple generations to achieve financial security by giving them more options and choices in managing their money.

“More than ever in these challenging times, equity release should neither be a default option or last resort; it should routinely be considered, alongside potential alternatives, with both short and long-term financial goals in mind.

“The greater product choice of the 2010s needs to translate into greater awareness in the 2020s so that every homeowner is prompted to consider where property wealth fits into their financial plans and not miss out on an option that could improve their quality of life.”