One in five homeowners are now open to equity release
According to recent research undertaken by Legal & General, one if five homeowners would now consider equity release as a way to unlock the cash tied up in their home.
18% of the 2500 participants of the survey said that they would consider a lifetime mortgage in the future, whilst 3% of the audience confirmed they had already used equity release, and a further 3% confirmed they had previously considered equity release as a route to realising their housing wealth.
Using homeownership figures from the Office for National Statistics, this would suggest that approx 2.55 million homeowners would consider using equity release in the future with 900,000 having already considered or accessed the product.
In 2017 the equity release sector surpassed the £3bn barrier and predictions have suggested it will reach £5bn by 2020.
The wealth available to over 55’s via equity release is growing
Furthermore Retirement Advantage has stated that the value of the potential wealth available to over-55s in the UK via equity release has sored by £10bn over the past 12 months.
Compared to a 1% growth in 2016, this represents an increase of 2.6% in the past year based on data of UK properties owned by the over 55’s and Nationwide house price figures.
It was also suggested in Legal & General’s report that the equity release sector contributed around £7bn to the UK economy and that for every £1 of equity released through an equity release product, a further contribution of £2.34 was made.
It did however add that a slowdown in house prices in Q4 2017 meant that the total value of the equity release market had fallen by £55m (0.01%) compared with Q3 2017.
Breaking down the direct economic impact industry by industry, L&G said manufacturing benefited the most at about £1.34bn.
It also estimated the construction sector saw a £349m injection – the equivalent annual salaries of 14,000 construction workers or 11,400 electricians, while the health and social work sector was boosted by £203m, approximately equivalent to 7,500 nurses, 3,200 doctors or 9,600 community workers.
Key part of retirement planning
Chris Knight, Retail Chief Executive Officer of Legal & General said: “With longevity increasing and awareness about lifetime mortgages growing, the role of equity release and its contribution to the national economy is set to grow further. Last year saw the sector surpass £3bn and a £5bn plus market is a strong possibility by 2020. But there is an estimated £1.5trn of property wealth in hands of Britain’s over-55s, so there is the potential for retirees and their housing equity to play a much bigger role in boosting UK GDP in years to come.”
Head of product and marketing at Retirement Advantage, Alice Watson suggested that the growth in house prices over the last 12 months was further evidence of the huge potential property value available for planning retirement.
“Concerns are growing that people are finding it difficult to save enough for the retirement they want, not helped by the sluggish wage growth we have seen over the last decade,” she said.
“There is an urgent need for property to become part of the retirement equation – and these figures demonstrate the impact it could have. For many, their property is the most valuable asset they own and typically worth far more than their savings.
“We saw a record £3bn taken out in UK equity release last year, but even this is a drop in the ocean compared to how much could potentially be drawn on by over-55s. With such a vast store of wealth in our bricks and mortar, equity release could grow even further in the coming months and years,” she added.