With the value of private property on the rise, there are a number of equity release products available. This can help fund retirements and further investment for people aged 55 or older.

For the first time, the total value of UK private Property surpassed £6trn, according to a report from the Equity Release Council. This happened near the end of last year as market activity recovered following the first COVID-19 lockdown. Discounting any mortgage debt, the amount of private property equity reached a record £4.6trn.

Regular mortgage repayments are below pre-COVID levels. This is likely due to those who have been negatively impacted by the pandemic. However, mortgage-holders still made £5.1bn worth of overpayments in the last quarter of 2020. Mortgage overpayments even topped about £192m per day. This shows that some households were able to put more savings towards paying their home off quicker.

Equity release options rising

Equity release can be used to free up some of the cash from properties and is available to those aged 55 and over. This involves releasing a lump sum of money from the property or taking out smaller amounts at a time. In recent years, there has been a rise in the number of people taking equity out of their existing home to invest in another property.

The number of products available in the equity release market increased to a record high. In the second half of last year, 100 new products were added to make 488 in total. This is over double the number of products available two years prior. Additionally, access to retirement interest-only mortgages improved in 2020 with over 100 products available for the first time.

David Burrowes, chairman of the Equity Release Council, says: “After the unprecedented upheaval of early 2020, the equity release market showed signs of recovery as households and businesses remained resilient against a challenging backdrop.”

Retirement planning

Property can play an important role in retirement planning. Often property investment is viewed as one of the top additions or alternative to a pension. Some pensions are starting to decrease in real terms. Many people on the verge of retirement are beginning to consider all the options available to them. And property investment comes out on top when investing for the long term.

Some retirees are using equity release as a way to free up money for retirement. Many have benefitted from the drawdown after seeing significant capital appreciation in their homes over the years.

“Accessing property wealth will play a vital role in retirement planning, both now and in the years to come,” he states. “For today’s retirees, it can make the difference between making ends meet or enjoying a more comfortable lifestyle by boosting their pension income, improving or adapting their homes life and paying for domestic care support.

“For younger generations, it can open up the possibility of receiving a ‘living inheritance’ to support their own financial goals, such as getting on the property ladder.”

Increasing property wealth

Long-term property investment is continuing to provide strong gains for many property owners and investors. In the UK, property tends to increase in value of time. This means the longer you own a property the higher your returns will likely be. Compared to historically low savings rates, property is a long-term asset providing a much higher level of stability.

According to research by Savills, the total value of the UK’s housing stock hit a record high of £7.56trn. Despite the challenging past year due to the pandemic, house prices have increased rapidly. And long-term outlook for investment in the UK property market remains positive for the coming years.

David Burrowes comments: “Property wealth ranks second only to pensions in terms of its importance to household finances across the country. The transformation of later life mortgage products in recent years has given people more opportunities to access property wealth at affordable rates.”

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