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.
Number and value of equity release plans
| Period | Number of plans | Annual Increase | Value of plans | Annual Increase |
| UK Q1 2022 | 12,551 | 21.40% | £1,399,519,804 | 30.50% |
| UK Q1 2021 | 10,341 | £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.
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 Geoff Garrett, Henry DannellThe 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
| Location | Average property value Equity Release - Q1 2022 | Wider average house price | Difference (£) | Difference (£) |
| London | £788,333 | £523,666 | £264,667 | 50.50% |
| Scotland | £248,728 | £181,415 | £67,313 | 37.10% |
| Wales | £274,720 | £206,395 | £68,325 | 33.10% |
| North West | £268,328 | £205,121 | £63,207 | 30.80% |
| Northern Ireland | £214,164 | £164,590 | £49,574 | 30.10% |
| West Midlands region | £310,029 | £240,528 | £69,501 | 28.90% |
| South West | £401,338 | £313,834 | £87,504 | 27.90% |
| North East | £193,243 | £154,913 | £38,330 | 24.70% |
| South East | £469,076 | £384,966 | £84,110 | 21.80% |
| Yorkshire and the Humber | £237,163 | £199,607 | £37,556 | 18.80% |
| East Midlands | £267,714 | £240,329 | £27,385 | 11.40% |
| East of England | £350,310 | £343,900 | £6,410 | 1.90% |
| United Kingdom | £373,493 | £278,436 | £95,057 | 34.10% |
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.
Cost of living
Garrett also pointed out that released equity has become a safety net to overcome the rising cost of living for some people.
“Equity release has seen a surge in popularity in recent times, particularly over the last year, but in our opinion this trend is certainly no reason for concern,” he said.
Data from Canada Life found in Q1 of this year 14 per cent of applications for equity release were made by customers looking to support their day-to-day living costs.
Over a third (36 per cent) of applications in Q1 were from customers looking to clear the remainder of their mortgage.
Alice Watson, head of marketing, insurance at Canada Life said: “From Q1’s results we can see that the desire to clear a mortgage continues to be a strong driver to pursuing equity release but we’ve also seen a continuous flow of people turning to equity release in order to cover their daily living expenses or consolidate debts, the demand likely being driven by the current cost of living crisis.”
In addition, research by LV revealed 12 per cent of retirees had outstanding mortgage debt when they retired.
More than half (56 per cent) said they used their pension to pay off their mortgage debts. While 6 per cent said they continued to do some paid work, 5 per cent downsized and 5 per cent used equity release.
Only 4 per cent spoke to a financial adviser.
Clive Bolton, managing director of protection, savings and retirement at LV, said it was important people consult a financial adviser to find the best option for them.
“Retirement is a major life change for people. The switch from bringing in a regular income to living off pensions and savings for the rest of your life can put a strain on finances. A mortgage is often a household’s largest monthly bill and LV’s research shows that millions of people already worry about running out of money in retirement.”
The research by LV also showed that a third of mortgage holders do not think they will have paid their mortgage off by the age of 65, while a further 9 per cent are not sure they will ever be able to pay it off.
In April, the FCA warned advisers it needed to look again at the equity release market to make sure it is working in the best interests of consumers.
jane.matthews@ft.com
