London equity release

The latest trends for London equity release

In our 2022 market report, we look at how rising property prices in particular have fuelled a 20% growth in the London equity release market over the past five years. We break down the impact of rising property prices – and how you can find out how much you could release.

The equity release market has been booming over the past decade, with the industry now six times bigger than it was in 2011 according to Equity Release Council figures. 

The availability of many new plans and flexible product features has contributed to this growth. But record average house prices and the impact this has on how much cash later life borrowers can access is also a factor – and London has seen a particularly strong property boom.

In this article we’ll explore the latest trends for equity release in London, including:

• How does equity release work?
• Average London house value rises £200k in ten years.
• What does the house price boom mean for London equity release potential?
• The growth in London’s equity release market.
• Will slowing property prices affect the London equity release market?
• Extra flexibility adds to the popularity of today’s equity release plans.
• Alternatives to equity release in London.
• Find out more about London equity release.

How does equity release work?

Before we get into our London equity release market report in detail, it’s worth just clarifying what equity release is and how it works. The main attraction of equity release is that it gives homeowners aged 55+ the chance to tap into the equity in their home without having to move. 

A lifetime mortgage is the most popular form of equity release. As well as the benefit of being able to stay in your home, it also means you can access cash with no need to make monthly payments. This is because the loan plus interest is typically only repaid when the homeowners pass away or move into long-term care.

Many people living in the capital will be aware that they have an especially strong potential for accessing helpful levels of tax-free cash with equity release. As we’ll discuss in this report, that’s because they often find themselves with significantly more equity than those living elsewhere in the UK.

Average London house value rises £200k in ten years

The value of your property is one of the main factors in determining how much tax-free cash you can access through equity release. The more your property is worth, the more you can potentially unlock. This is why an analysis of equity release in London starts with a look at property prices.

It’s been widely publicised that house prices in London have risen dramatically over the past decade or so. This table shows how they have risen since 2012, compared to UK average house prices: 

(SOURCE: Nationwide House Price Index figures for third quarter of each year.)

To sum up the numbers in the above table, the average house price in the capital rose by £233,377 in the last decade; that’s a growth of 77%. In contrast, the average home in the UK rose in value by £109,225 – a 66% increase. 

In the last year alone, a staggering £1million was added to the UK’s housing market every minute according to the Equity Release Council. In London, the average house price increased from £500,980 in Q3 2021 to £534,545 in Q3 2022. The £33,565 growth outstrips the UK’s national average earnings – before tax or housing costs – of £30,420.

Latest figures from Canada Life have revealed that London homeowners collectively have £146.3bn of potential equity to unlock. This equates to around £191,000 of average equity per home in the capital. With many people finding themselves ‘asset rich, cash poor’ in retirement, could we see more homeowners turning to their properties to boost their income?

What does the house price boom mean for London equity release potential?

The surge in house prices over the last decade means that London homeowners have potentially hundreds of thousands of pounds of extra equity available. So just how much equity can Londoners unlock?

A homeowner aged 55+ can typically unlock between 20-60% of their home’s value with equity release. Just how much depends on criteria including their age (the older you are the more you can unlock), property type and location.  

Let’s look at how much equity a typical 71-year-old living in London may have been able to unlock with an equity release plan over the last decade:

(These are example figures based on a 71-year-old releasing 50% of the total value of their home with a standard plan. )

The 71 year-old we’ve based these figures on could potentially release £31,392 more than five years ago, and a huge £116,688 more equity than a decade ago.

The growth in London’s equity release market

With such high levels of equity available, and of course much more for the thousands of people living in higher-value properties, it’s perhaps not surprising that many London homeowners turn to equity release. 

The popularity of equity release in London is clear from the most recent full-year figures produced by the Equity Release Council’s Autumn 2022 Market Report. In 2021, two in five (42%) of new equity release plans were in London and the South. This compares to 29% in the Midlands or East of England, 18% in Yorkshire and northern regions and 11% in Wales, Scotland and Northern Ireland.

The same report shows that over the period 2017-2021 there was a 20% increase in the number of equity release plans taken out annually in London. 

Will slowing house prices affect the London equity release market?

Despite doomy predictions of a drop in house prices by as much as 10% in 2023, properties across London and the rest of the UK are likely to still be higher in value than they were ten years ago. 

The London Housing Market Report by GLA’s Catarina Finnerty published in July 2022 indicated that demand amongst buyers in London was already starting to fall due to inflation and economic uncertainty. However, it also pointed out that house prices were continuing to rise due to the low numbers of properties on the market. 

This trend could well continue, with the report going on to note that the number of large house building schemes starting in London fell considerably between Q1 and Q2 2022, whilst completions rose. 

The crucial question is: could we see a greater housing supply issue down the line? If so, could this quash the predictions for a house price slump in London as buyers scrabble to find suitable housing? Nobody can be certain, and we are watching the market with interest. 

Extra flexibility adds to the popularity of equity release

Equity release plans have evolved significantly over the last decade, and a number of helpful features available with today’s plans mean you may be able to:

• Guarantee an inheritance for loved ones

• Make ad hoc voluntary repayments to minimise the interest accruing

• Arrange an interest-only lifetime mortgage to prevent the loan from increasing

• Access enhanced, lower rates or more cash if you have one or more qualifying health conditions

• Unlock tax-free cash with second home equity release or buy-to-let equity release

With hundreds of plans now available, together with more flexible features to appeal to today’s homeowners, the equity release sector continues to grow. Whether that changes in the future if house prices begin to fall, only time will tell. But for now there is certainly lots of choice for London equity release customers.

Alternatives to equity release in London

Of course, Londoners have options other than equity release open to them when looking for a lump sum or extra income in later life. Downsizing is one possibility, but many people who have lived their whole lives in London are understandably unwilling to move out of the capital. The prospect of selling the family home to access some of the equity from it can be very upsetting. 

Thanks to equity release, London homeowners aged 55+ can unlock the tax-free cash from their properties without having to sell or move away from the home they love. Of course, this should be done only after taking professional advice and carefully balancing the pros and cons of each option.

Remortgaging is another option for those looking to tap into their growing equity. However, those in need of a cash boost in later life might be reluctant to take on the burden of more monthly repayments for a remortgage deal. With equity release, there are no mandatory monthly repayments. Instead, the loan plus interest is repaid when your plan comes to an end, usually when you pass away or move into long-term care.

Find out more about London equity release

At Equity Release Wise, our friendly team of selected advisers are specialists in equity release. London homeowners can benefit from a simple, hassle-free quotation service to discover how much tax-free money you could unlock. 

Find out if you qualify for an equity release plan and how much you could release by speaking to Equity Release Wise today. Our selected advisers can answer all your questions and search for the best deals personalised to you. To find out how much you could borrow, check here, call 0808 178 3055 or request a free call back at a time that suits you.