Few Britons who took their first, tentative, steps en route to securing a home of their own towards the end of last century could have imagined the extent to which their property’s value would soar.
For empirical confirmation, we need only consult data assembled by the country’s largest building society, the Nationwide, which has tracked quarterly property values since 1952. Back then, the average cost of a home was £1,891.Thirty years later, the same ‘average’ property would set you back £25,580, still very affordable for people wanting to get onto the property ladder’s first rung.
Average values almost doubled over the next decade, but for those who hadn’t yet joined the bricks-and-mortar juggernaut, values slowed markedly between 1989-95, (from £62,782 to £50,930) giving these folks too, an unexpected, but prolonged opportunity to hop on board.
The rest of the story is well known. Homes valued at £50,930 in the final quarter of 1995 were, by the end of last year, worth a smidgeon over £273,000. It means that since Nationwide started publishing property statistics, the average home has risen in value by a factor of 144. No wonder it takes the average first time buyer (FTB) around six years to save the deposit with which to buy; little wonder too that an estimated one third of FTBs receive some form of financial assistance from the Bank of Mum & Dad, now the nation’s sixth-largest lender.
While property prices may fluctuate over time due to a variety of factors – interest rates, inflation, the state of the economy etc, the longer-term trend continues its upward march. Not surprisingly, then, parents searching for a way of helping their children or grandchildren get a foot on the property ladder increasingly realise that they could take advantage of this steady rise in values by releasing a proportion of the often considerable wealth that has built-up in their home.
Britons are not exactly obsessed with property values, but because we invest so much physical, financial and emotional capital into our homes, we appreciate their worth and recognise their unique status as by far the most valuable asset many of us own.
Moreover, there would be few dissenting voices were you to argue that when it comes to property ownership, the ‘lucky generation’ of post-war baby boomers hit the jackpot, as even our cursory examination of longer term real estate values above prove.
A sizeable percentage of UK homeowners aged 55 and over have witnessed phenomenal increases in their property’s worth. For those wishing to give their offspring a leg-up onto that all-important first rung of the property ladder, using this colossal growth to their advantage is an increasingly attractive financial option.
They’re far from being alone. According to figures released in January by the Equity Release Council, homeowners released almost £2.57 billion worth of tax-free equity from their property last year, up from £2.3 billion in 2024. Much of this was used to provide a valuable contribution to a loved one’s property deposit , while a significant amount was set aside for home improvements, luxury holidays, new cars and a host of other items besides.
Commenting on last year’s 11% rise in equity release lending, David Burrowes, chair of the Council, said: “Increasingly, releasing equity is part of homeowners’ retirement plans. Almost four in every ten retirees (38%) are on track for a retirement income below the Pensions UK ‘minimum standard’. Demographic and economic pressures mean the demand [for equity release] is… likely to grow [as] equity release [becomes] more flexible and more secure, making it more attractive to consumers.”
For example, by taking advantage of a specialist ‘lifetime mortgage’, only available to those aged 55 and above, millions of homeowners could release a tax-free sum to spend exactly how they wish.
For many older homeowners, equity release is not simply about improving their own retirement lifestyle; it can also be a practical way of helping younger family members onto the property ladder.
By releasing a portion of the wealth tied-up in their home and gifting it to a child or grandchild, parents and grandparents may be able to provide the kind of meaningful deposit support that would otherwise take years to accumulate. In this way, housing equity built up over decades can be used to benefit more than one generation.
There are also three additional advantages to releasing equity from your home:
First, homeowners retain full ownership of their property for life, or until they move into permanent residential care. During this hopefully long period of time, the homeowners also continue to benefit from any increase in their property’s value.
Second, there is no requirement to make monthly repayments because the loan is repaid via the property’s sale once the homeowner(s) die or move to permanent residential care.
Third, lifetime mortgages approved by the Equity Release Council are designed to ensure homeowners can never owe more than the value of their home.
Equity release is not a panacea, although it can be an excellent option for pensioners looking for ways to supplement their existing retirement income. Indeed, homeowners are often surprised to discover that the funds they release from their property remain tax-free. This applies whether they take a one-off lump sum or prefer regular payments via drawdown.
By 2035, more than a quarter of the UK’s population will be aged over 65, while the number of people aged over 85 is forecast to double to 3.2 million by the mid-2040s, with one in five people living to see their 100th birthday. Whether the state pension is capable of keeping up with such growth is questionable.
Of course, using a proportion of home equity today would mean there is less available in the future. Accordingly, it is essential to discuss this and other matters with a qualified equity release adviser before taking any action, not least because releasing equity could reduce an estate’s value and affect any entitlement to means-tested benefits. Also, it’s important to note - drawing on housing wealth now means less may be available in later life, whether for future borrowing needs, care costs or other unforeseen expenses.
As demand for equity release has soared, so too has the range of lifetime mortgages available for homeowners. Those wishing to help the family’s FTBs in their quest to scramble onto the property ladder now have the opportunity to discuss these options with an adviser in the comfort of their own home.
