Market analysis has revealed that UK homeowners have already released equity to the tune of £1.4bn so far in 2022, with this figure estimated to hit almost £5.6bn by the end of the year.
The figures show that during the first three months of this year, over 12,500 homeowners opted to utilise the pent up value accumulated within their property via later life mortgages – a 21.4% annual increase when compared to the first quarter of 2021.
Leading mortgage broker, Henry Dannell, estimates that this figure could hit over 50,000 by the end of the year, a 19.6% uplift on the 41,990 homes to release equity in 2021.
With the total value of equity released in 2021 topping £4.4bn, and already reaching £1.4bn in 2022, Henry Dannell estimates that almost £5.6bn could be released in residential real estate equity by the end of this year.
This increased market activity is being partly driven by high-net-worth individuals and those at the higher end of the property ladder.
In fact, three of the nation’s most expensive property areas rank top for later life mortgage activity and value being released.
The South East (9%) and the South West (6%) account for the largest proportion of total later life mortgage plans so far this year and, along with London, they also account for the highest value of equity released in 2022 – totalling £810.5m across these three regions alone.
This high-end market trend is also apparent when looking at the average value of properties utilising later life mortgages.
So far in 2022, the average equity release house price sits at £373,493. This is already 2% higher when compared to the first quarter of last year and 14% higher than the average equity release property value seen in Q1 of 2020.
What’s more, the current value of a property utilising equity release through later life mortgages comes in 34% above the wider UK market average.
Director of Henry Dannell, Geoff Garrett, commented:
“Later life mortgages have continued to grow in popularity amongst the nation’s homeowners, many of whom are now making the most of the considerable increase in value that their property has yielded over the last two years.
For some, it’s become a safety net to overcome the rising cost of living, but we’re also seeing this increased activity being driven by those at the top end of the market, who may not be facing the same financial struggles as the average homeowner.
This is down to a number of factors – greater product choice and flexibility means that later life mortgages are no longer the rigid, complex instrument that they were and a competitive lending market has also helped to drive down the cost of drawing equity from a property.
For the vast majority, it’s a tax efficient way to redistribute their wealth to future generations, allowing children or grandchildren to get that first foot on the ladder, or perhaps to climb a rung or two further up it.
Not only does this form of estate planning help minimise their potential inheritance tax bill, it also allows them and their family to enjoy this redistribution of wealth here and now, rather than waiting until they’ve passed on.
In the same vein, equity released from later life mortgages can also enhance their golden years by supplementing their income or pension pot, providing them with the disposable income to enjoy their lifestyle choices.”
|Table shows the number and value of equity release plans in the UK during Q1, 2022 and the annual change versus Q1, 2021|
|Period||Number of plans||Annual Increase||Value of plans||Annual Increase|
|UK Q1 2022||12551||21.4%||£1,399,519,804||30.5%|
|UK Q1 2021||10341||£1,072,427,497|
|Table shows the total number and value of equity release plans by UK region in Q1, 2022|
|Location||Number of plans – Q1 2022||Total value of plans – Q1 2022|
|West Midlands region||1,047||£100,076,777|
|East of England||754||£76,771,544|
|Yorkshire and the Humber||1,000||£71,635,814|
|United Kingdom – total||12,551||£1,399,519,804|
|Table shows estimated total annual number and value of equity release plans for 2022 and the annual change versus 2021|
|Location||Number of plans – 2021||Estimated number of plans – 2022||Annual Change (%)||Total value of plans – 2021||Estimate total value of plans2022||Annual Change (%)|
|East of England||2,481||3,016||21.6%||£216,072,444||£307,086,176||42.1%|
|West Midlands region||2,305||4,188||81.7%||£151,979,812||£400,307,108||163.4%|
|Yorkshire and the Humber||341||4,000||1073.0%||£19,993,172||£286,543,256||1333.2%|
|United Kingdom – total||41,990||50,204||19.6%||£4,400,281,149||£5,598,079,216||27.2%|
|Table shows the average value of a property utilising equity release and how it compares to the wider average house price|
|Location||Average property value Equity Release – Q1 2022||Wider average house price||Difference (£)||Difference (£)|
|West Midlands region||£310,029||£240,528||£69,501||28.9%|
|Yorkshire and the Humber||£237,163||£199,607||£37,556||18.8%|
|East of England||£350,310||£343,900||£6,410||1.9%|