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Pensioner property wealth hits £1 trillion

19 September 2016

Retired homeowners have seen their property wealth break through the £1 trillion barrier for the first time as the housing market continued to boom shrugging off Brexit fears, new analysis** from leading over-55s financial specialist www.keyadvice.co.uk shows.
 
Pensioners who have paid off mortgages earned an average of £19,120 tax-free each from their houses in the past three months taking their property wealth to a new record high.
 
Only over-65s in London and Scotland missed out in the past three months with Londoners seeing average falls of more than £62,000 and Scots suffering declines of nearly £16,000.
 
However despite short-term ups and downs over-65 homeowners have seen strong long-term growth - since Key started analysing over-65s housing wealth in 2010, total pensioner property wealth has increased by around 24% or £245 billion which is worth around £55,000 on average for every homeowner. Owning a home has been worth around £9,100 a year for over-65s.
 
Its Pensioner Property Index shows over-65 homeowners now own homes worth £1.01 trillion outright underlining the huge role property wealth is playing in financial planning and improving lifestyles in retirement.
 
The growth in property wealth is helping drive the expansion of the equity release market with customers taking advantage of record low rates to cash in on their homes releasing around £76,300 on average, rising to more than £184,000 in London***.
 
The South East of England has now replaced London as the wealthiest region for over-65s accounting for a fifth of all UK pensioner property wealth. But it’s not doom and gloom for Londoners who, despite the recent fall, have experienced huge gains. Since the first index was published in 2010, Londoners have gained an average of £137,000 each over the period or £22,800 per year!
 
Key highlights how record low rates for equity release coupled with the gains made are great news for pensioners. Looking at the best fixed rate 12 months ago compared to today, a pensioner borrowing the average release of £76,300 would now save £29,867 in interest over 15 years, increasing to a staggering £49,651 saving over 20 years*.

Dean Mirfin, technical director at Key said: “Property wealth is a growing asset for pensioners highlighting the success of investing in a home for the over-65s.
 
“The long-term story as highlighted by our research is that property has performed very well with average over-65s making more than £9,000 a year during a period of record low interest rates and stock market volatility.
 
“That is demonstrated by the average £76,300 that pensioners are choosing to release tax-free from their properties to enhance their retirement standard of living in general as well as to use for a wide range of purposes from holidays to considerable home improvement projects. With record low interest rates it is hardly surprising that property gains are being capitalised upon throughout the UK.”
                                                        
The table below shows the 11 areas of Great Britain monitored by Key’s index with just London and Scotland seeing price falls.
 


Region
Average change in value of home equity for homeowners aged 65+ (between May and August index) Combined change in value of home equity for homeowners aged 65+ (between May  and August index)
South East increase of £42,420 +£27.827 billion
London £62,581 decrease -£22.904 billion
South West increase of £37,902 +£23.749 billion
North West Increase of £32,302 +£21.674 billion
East Anglia increase of £49,040 +£23.147 billion
East Midlands increase of £31,243 +£13.471 billion
West Midlands increase of £34,740 +£12.353 billion
Yorks/Humbs increase of £27,865 +£8.041 billion
Scotland £15,916 decrease -£4.488 billion
Wales increase of £23,017 +£6.090 billion
North East increase of £26,889 +£7.394 billion
GREAT BRITAIN +£19,120 +£84.308 billion
 
The table below shows over-65 homeowners in the North West are most likely to own their home outright – Key’s analysis shows 671,000 own their homes without mortgages compared with 656,000 in the South East. 
 

Region
Estimated property equity in homes owned outright by people aged 65+ (August 2016) Estimated percentage of total value of property equity belonging to people aged 65+ (August 2016) Number of households in the region owned outright by people aged 65+
South East £202.801 billion 20.07% 656,000
London £172.826 billion 17.1% 366,000
South West £147.242 billion 14.57% 626,600
East Anglia £127.453 billion 12.61% 472,000
North West £99.522 billion 9.85% 671,000
East Midlands £73.934 billion 7.32% 431,200
West Midlands £62.719 billion 6.21% 358,400
Yorks/Humbs £43.205  billion 4.27% 288,600
Scotland £40.405 billion 4% 282,000
Wales £38.429 billion 3.8% 264,600
North East £34.229  billion 3.39% 275,000
GREAT BRITAIN £1.01 trillion   4,409,400
 
Anyone looking to release equity from their home can get Key’s independent guide to equity release by calling 0800 531 6010 or visiting www.keyadvice.co.uk/equity-release/request-a-free-guide