"It does mean homeowners will have a larger sum of equity tied up in their property, should they wish to unlock it"
- Ben Waugh, managing director at more2life
People on pension incomes have received minimal increases in real standards of living over the last decade, according to new analysis by more2life. Pensioners have only received a 1% p.a. increase (accounting for inflation) in average weekly pension income between 2013 and 2022.
ONS data shows between 2013 and 2022, average weekly pension income grew by just £29, from £320 to £349. Pension incomes peaked at an average of £376 in 2021, before falling £27 in 2022 – the first decrease recorded since 2017. The average is expected to have fallen again last year, after another year of economic turbulence and rising living costs, creating financial challenges for elderly people on fixed retirement incomes.
However, average house prices jumped by 67% (not accounting for inflation) between 2013 and 2022, meaning many over 50s will own properties which have seen their value increase significantly. Accessing this housing wealth could provide retirees with additional income or it could be used for discretionary spending.
How much equity do homeowners have in their property?
JLL’s analysis of the Bank of England’s Mortgage and Lending Report shows more than 62% of the 8.4 million owner-occupiers in the UK have at least 25% equity in their property. Just over a third (34%) have between 10-25% equity, 4% have between 5% and 10% equity, and 0.2% have less than 5% equity.
Against the current UK average house price (£280,660) this translates to:
• 62% of UK homeowners having at least £70,165 worth of equity in their property;
• 34% having between £28,066 - £70,165 worth of equity in their property;
• 4% having between £14,033 - £28,066 worth of equity in their property;
• 0.2% having less than £14,033 worth of equity in their property.
Ben Waugh, managing director at more2life, commented: “Our analysis shows that while pensioners have received very little in ways of income growth over the last decade, the value of their homes have accrued substantially. On the one hand, rising house prices can be an encumbrance for borrowers, with mortgage repayments often rising in tandem. However, it does mean homeowners will have a larger sum of equity tied up in their property, should they wish to unlock it – funds that can either be used to augment stagnant pension pots, help grapple with higher mortgage repayments, or even be put towards financing home improvements or a family holiday.
“The majority of UK homeowners have at least £70,165 worth of equity tied up in their property – a substantial sum of money. Equity release can serve as a vehicle to unlock these funds, with an increasingly diverse suite of later life lending products available on the market for over-50s. However, before coming to any conclusions, borrowers should seek the expert guidance of an independent financial adviser. It is important individuals are made aware of all the options that are open to them, and crucially, what option will produce the best outcomes for their personal needs – even if this means being advised against later life lending.”
