Older homeowners see homes climb £10,000 in value on average this year as house prices defy economic storm
- Total property wealth of over-65s has increased £101.5billion this year
- London homeowners saw their houses increase by an average of £16,000
- Nearly 37% of all housing wealth in the UK is owned by over-65s
Older homeowners have seen the value of their properties increase by more than £10,000 on average since the start of the year, as house prices have remained buoyant despite interest rate rises and the cost of living crisis.
So far this year the total property wealth owned outright by over-65s has increased by £101.5billion to almost £3trillion, research from later in life lender Key shows.
This is worth an average £10,121 for each homeowner who has paid off their mortgage.
More older homeowners are using the value of their property to fund their living costs via equity release products
The greatest gains per household over the year were in London where homeowners are more than £16,000 better off while in the South West average gains are just behind at £15,950.
As a region the South West saw the biggest total gain at £16.7billion ahead of the South East and London on £15.5billion and £15.3billion, respectively.
The figures run from January to May this year; over the same period the Halifax House Price Index recorded a 4.5 per cent increase in prices, around £12,300.
The disparity between the average increase for all homeowners and those over 65 may be because of the trend among those who have paid off their mortgage to downsize in later years.
Almost 37 per cent of all housing wealth owned by over-65s is concentrated in the South East and London even though more older homeowners in East Anglia, the South West, North West, and West Midlands own their homes outright than in the capital.
Overall house prices have continued rise in the UK, defying the increasingly turbulent economic conditions.
In August the average house price increased to £294,260 according to Halifax. The figure means house prices climbed 6.5 per cent on average so far this year, adding an additional £18,000 since December.
However, there are signs of a slowdown. The annual rate of growth for the year to August 2022 was at its lowest point in three months.
Will Hale, CEO at Key, said: ‘In the wake of the pandemic and stamp duty holiday, the housing market has been buoyant as more people looked to get their first foot on the property ladder or move property.
‘While there are signs that it is cooling in the face of rising interest rates and the cost-of-living squeeze, older homeowners are likely to have substantial equity tied up in their homes.
Equity release: How it works and advice
To help readers considering equity release, This is Money has partnered with Age Partnership+, independent advisers who specialise in retirement mortgages and equity release.
Age Partnership+ compares deals across the whole of the market and their advisers can help you work out whether equity release is right for you – or whether there are better options, such as downsizing.
Age Partnership+ advisers can also see if those with existing equity release deals can save money by switching.
You can compare equity release rates and work out how much you could potentially borrow with This is Money’s and Age Partnership+’s new equity release comparison tool.
‘Choosing to use housing equity is a decision which needs to work for over-65s now and in the future, but people should know that there are options available to help them meet increasingly unsustainable utility and food bills if they are living in a substantial asset.
‘Those on low to modest or fixed income have been particularly hard hit with the recent price rises and with pension incomes often not keeping pace with inflation, many older customers are really feeling the pinch.
‘With equity release rates increasing and uncertainty around property prices, now is a good time for older homeowners to seek specialist advice and consider all their options.’
Equity release, also known as a lifetime mortgage, is when homeowners over the age of 55 take a loan of up to 60 per cent of the value of their property.
This must then be repaid, with interest, when they die or go into long-term care. However, some products do now allow the interest on the loan or the loan itself to be repaid annually throughout the term.
The number of new equity release plans agreed in the second quarter of this year increased 26 per cent year-on-year when compared with the subdued market of Q2 2021, when pandemic restrictions remained in place, as more homeowners look to use the value of their homes to fund living costs.