The total value of private property in the UK topped £6trillion for the first time on record last year, fresh data reveals.
Mortgage-holders also made an ‘unprecedented’ £5.1billion worth of overpayments in the final quarter of 2020, but regular repayments remain below pre-pandemic levels, the Equity Release Council said.
In the final quarter of last year, on average, mortgage overpayments topped around £192million a day, suggesting some households channelled savings made from enforced home-working to getting the debt on their home paid off quicker.
Discounting mortgage debt, the amount of UK property equity which is privately owned reached a record £4.6trillion. Including the debt, it’s over £6trillion
Costly: The total value of private property in the UK topped £6trillion for the first time on record last year
But, regular mortgage repayments remained 2 per cent lower in the final quarter than they were a year earlier ‘as households who have been negatively impacted by the pandemic use relief measures such as mortgage holidays to defer their repayment obligations’, according to the findings.
The nation’s private property wealth reached the equivalent to £189,549 for the average UK property owner, the findings added.
The Equity Release Council said: ‘While total mortgage debt also rose to a new high – just short of £1.5trillion – the impact of rising prices increased owners’ property wealth (their remaining equity once mortgage debt is accounted for) to a combined £4.6trillion’.
The average loan-to-value of property dropped to 24.6 per cent, which is the lowest level seen since before 2007/8.
This means the average UK property owner held equity of £189,549 alongside an average loan of £61,951 last year.
According to the data, people over the age of 55 withdrew 46p of property wealth for every £1 of flexible pension payments in the second half of last year.
The number of new equity release plans taken out also rose 19 per cent to 21,917 in the final half of 2020.
‘While new customer activity remained 6 per cent below pre-pandemic levels from H2 2019 and 2018, it remained some distance above the benchmark of 20,000 first passed in H2 2017, showing the underlying resilience of the market’, the Equity Release Council said.
The number of equity release products available rose to record highs, with 100 new products added in the second half, with a total of 488 products available by the end of 2020.
In two years, the proportion of equity release plans offering an interest rate of 4 per cent or lower has risen from 7 per cent in January 2019 to nearly 58 per cent in January this year, the research claimed.
Equity release: Average equity release interest rates, January 2016 to January 2021
Lifetime mortgage product rates have also continued to drop over the last six months, falling to a record low of 3.95 per cent in January 2021, it added.
Equity release unlocks the value built up in a home, allowing you to access it in the form of tax-free cash.
This is then repaid through the sale of your property when you pass away, go into long-term care or sell the home for another reason.
Lifetime mortgages are the most popular type of equity release product, and are available to homeowners over 55. Homeowners can opt for a drawdown lifetime mortgage or a lump sum lifetime mortgage.
Sometimes, people plump for equity release to clear debts, help younger family members onto the property ladder, make home improvements, or even just to head off into the sunset for the holiday.
But, equity release will not be suitable for everyone and is not something to be jumped into lightly as it can be risky.
Anyone thinking about going down the equity release route should take professional financial and legal advice before taking any product out.
David Burrowes, chairman of the Equity Release Council, said: ‘After the unprecedented upheaval of early 2020, the equity release market showed signs of recovery as households and businesses remained resilient against a challenging backdrop.
‘Property wealth ranks second only to pensions in terms of its importance to household finances across the country. The transformation of later life mortgage products in recent years has given people more opportunities to access property wealth at affordable rates.
‘Accessing property wealth will play a vital role in retirement planning, both now and in the years to come. For today’s retirees, it can make the difference between making ends meet or enjoying a more comfortable lifestyle by boosting their pension income, improving or adapting their homes life and paying for domestic care support.
‘For younger generations, it can open up the possibility of receiving a ‘living inheritance’ to support their own financial goals, such as getting on the property ladder.’
Wise up: Anyone thinking about going down the equity release route should take professional financial and legal advice before taking any product out
Equity release: How it works and where to get advice
This is Money has partnered with Age Partnership, a firm of independent advisers who specialise in finding retirement mortgages and equity release that works for you.
>> Find about equity release and get advice
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