Mortgages  

HNWs and surging cost of living drives increase in equity release

HNWs and surging cost of living drives increase in equity release

UK homeowners have released equity of £1.4bn so far this year, which has been driven by both high-net-worth individuals and the surging cost of living.

Data from mortgage broker Henry Dannell found this could hit almost £5.6bn by the end of the year, a significant rise from last year’s £4.4bn.

According to director of Henry Dannell, Geoff Garrett, homeowners are making the most of the amount the properties have increased in value over the past two years.

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Number and value of equity release plans

PeriodNumber of plansAnnual IncreaseValue of plansAnnual Increase
UK Q1 202212,551

21.40%

£1,399,519,804

30.50%

UK Q1 202110,341£1,072,427,497

Source: Henry Dannell

The trend is being driven by those at the top end of the market who may not be facing the same financial struggles as the average homeowner. 

Garrett puts this down to a number of factors including greater product choice and flexibility in the market.

He said: “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.”

The first quarter of 2021 saw a 21.4 per cent increase on the same period last year, with more than 12,500 homeowners choosing to use the value accumulated within their property via later life mortgages. 

Henry Dannell estimated this figure could hit more than 50,000 by the end of the year, a 19.6 per cent uplift on the 41,990 homes that released equity in 2021.

High-net-worth households

The data showed three of the most expensive property areas ranked top for the value being released.

The South East (9 per cent) and the South West (6 per cent) account for the largest proportion of total later life mortgage plans so far this year. 

Along with London they also account for the highest value of equity released in 2022 - totalling £810.5mn across these three regions alone.

Average value of a property utilising equity release compared to wider average house price

LocationAverage property value Equity Release - Q1 2022Wider average house priceDifference (£)Difference (£)
London£788,333£523,666£264,66750.50%
Scotland£248,728£181,415£67,31337.10%
Wales£274,720£206,395£68,32533.10%
North West£268,328£205,121£63,20730.80%
Northern Ireland£214,164£164,590£49,57430.10%
West Midlands region£310,029£240,528£69,50128.90%
South West£401,338£313,834£87,50427.90%
North East£193,243£154,913£38,33024.70%
South East£469,076£384,966£84,11021.80%
Yorkshire and the Humber£237,163£199,607£37,55618.80%
East Midlands£267,714£240,329£27,38511.40%
East of England£350,310£343,900£6,4101.90%
United Kingdom£373,493£278,436£95,05734.10%

Source: Henry Dannell

So far in 2022, the average equity release house price sits at £373,493. This is already 2 per cent higher when compared to the first quarter of last year and 14 per cent 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 per cent above the wider UK market average. 

Garrett said: “Not only does this form of estate planning help minimise a family’s potential inheritance tax bill, it also allows the individual and their family to enjoy this redistribution of wealth here and now, rather than waiting until they’ve passed on.”

He added that equity released from later life mortgages can also supplement pensioners’ income or pension pot, providing them with disposable income to enjoy their lifestyle choices.