Homeowners in England and Wales could access five years’ worth of retirement income from property wealth

Homeowners in England and Wales could access the equivalent of five years’ worth of retirement income by using equity release, according to analysis by Legal & General Home Finance (LGHF) of median local house price data recently released by the Office for National Statistics (ONS)¹.

The most recently available ONS data of median house prices in England and Wales, for the period up to September 2022, still showed an average increase of 2% over the last year, despite market volatility.

Unprecedented house price growth over the last five years, means homeowners would have seen an average increase of 22% in the value of their property. This would see the average homeowner able to access £67,200 through equity release, which equates to five years of retirement income, according to the PLSA’s most recent ‘Retirement Living Standards’ report published in January 2023. Equity release can be taken, tax free, from the property with no need to repay until the last homeowner passes away or moves into long term care. However, if a customer releasing £67,200 decided to service the interest, via an Optional Payment Lifetime Mortgage (OPLM), the monthly interest payment last year would have been £215.60².

Legal & General’s average loan in 2022 was £115k – indicating that homeowners with higher value properties are more likely to consider accessing the value in their homes through lifetime mortgages. The OPLM monthly interest payment for this amount last year was around £368.96, depending on the product taken.

Homeowners in Wales were likely to see the biggest increases in recent years to the amount they can release from their homes– with the amount rising by an average of 6% in the last year and 32% over the last five years. The local authorities with the biggest increase in property wealth potential over the last five years include Blaenau Gwent (51%), Leicester (45%) and Manchester (43%). 

Top 10 local authorities with the biggest percentage increase in equity release potential over the last year

References

¹The average equity release customer accessed 24% of the value of their home in 2022, according to Legal & General Home Finance data.

Based on average property values across local authorities in England and Wales as per Office for National Statistics, House price statistics for small areas in England and Wales: year ending September 2022 (released March 2023), this would mean a median average of £67,200 worth of equity could be release from a property.

According to the PLSA’s most recent ‘Retirement Living Standards’ report published in January 2023, the minimum standard of income for a single person (living outside of London) is £12,800 per annum. These are current figures at the time of publication but are subject to review annually. The comparison with property wealth assumes no income tax is payable, as the amount released from equity release is tax-free.

£67,200/£12,800 = 5.25 years

² Based on average Optional Payment Lifetime Mortgage (OPLM) homeowners, where the youngest borrower is aged 69 years old, to achieve an average release of 24% this would have been at a rate of 3.85% MER. External events resulted in rates varying at points throughout last year, but this rate offered through Legal & General’s Black product between 17th March to 6th June 2022 was the most steady period.