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£1.5bn released from property as homeowners turn to equity release to combat the cost of living crisis

£1.5bn released from property as homeowners turn to equity release to combat the cost of living crisis

The latest analysis from specialist property lending experts, Octane Capital, has revealed that the nation’s homebuyers are turning to equity release to help combat the cost of living crisis, with the total value of equity released up 73% annually, driven by both an increase in volume and the sums being released per plan. 

The cost of living crisis continues to stretch households across the nation to financial breaking point. As of October, a 95.8% increase to the energy price cap means the average household is paying £2,500 per year to run their homes. 

Even the average annual spend on our shopping has soared, with the average household now spending £4,295 per year – up 15% in a year. 

While the record levels of house price growth seen during the pandemic have started to subside, the average UK house price has still climbed by 12.6% in the last year. 

However, with the health of the UK property market looking uncertain over the short-term, at least, the nation’s homeowners are turning to equity release to combat the cost of living crisis, as well as improve their existing homes, rather than making the move to a larger property. 

In fact, the latest quarterly data shows that the number of homeowners opting to release equity from their home is up 25% compared to this time last year. The largest increase has been across Northern Ireland, with a 149% annual increase in equity release activity, followed by the North East (60%) and Yorkshire and the Humber (52%). 

But it’s not just the number of homeowners opting to release equity that is on the up, the amount they’re releasing has also climbed. In fact, the average amount released across the UK during the last quarter sat at an average of £114,356, a 38% increase compared to the previous year. 

This trend has been driven by the London market, where the average level of equity released is up 59% year on year, averaging £261,880. 

Both an increase in equity release plans and the propensity to release a higher level of equity has pushed the total level of equity released to £1.526bn in the last quarter alone, a 73% annual increase vs the same quarter last year. 

CEO of Octane Capital, Jonathan Samuels, commented:

“Homeowners are facing a prolonged period of financial uncertainty, with the cost of living crisis stretching their household finances extremely thin. 

At the same time, a drop in property market confidence along with the increasing cost of borrowing has caused many to think twice before continuing to climb the property ladder. 

However, following the pandemic property market boom, many homeowners have enjoyed a substantial boost where the value of their home is concerned and so while they may be short on cash, they’ve seen the value of their bricks and mortar nest egg increase. 

As a result, there’s been a sharp increase not only in the number of homeowners opting to release the equity built up in their home, but also the level of equity they are choosing to release. 

Cashing in their chips is allowing them to improve their existing home in order to meet their needs, as well as providing them with a lump sum to help stabilise their finances during the current economic downturn.”

Data tablesData tables and sources can be viewed online, here.

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BDC 301 February 2023