Briton’s releasing equity from their homes for retirement have supported the UK economy by over £7bn in 2017, according to new research from Legal & General Home Finance and the Centre for Economics and Business Research.
The lifetime mortgage lenders Silver Spenders report found that equity release contributes up to £7.1bn to UK gross output.
Lifetime mortgages - a type of equity release - have seen a surge in popularity amongst Britain’s older homeowners in recent years, becoming the fastest growing sector of the mortgage market. Lifetime mortgage sales tripled between 2013 and 2017, rising from just over £1bn to more than £3bn in 2017, according to the Equity Release Council.
The new research set out to analyse the current direct, indirect and induced impact of the equity released from homeowners’ properties on the UK economy and specific industries. It found that for every £1 of housing wealth accessed through equity release products, £2.34 is generated for the British economy.
When analysing the actual number of jobs created by equity release spending, Legal & General’s research found that equity release supports 37,100 jobs directly and indirectly across the UK. And this is likely to grow significantly over time.
As part of the research, Legal & General surveyed over 2,500 consumers, asking them about their opinions on accessing property wealth in retirement. Only 3% of Britain’s homeowners said they had released equity, yet 18% said they would consider accessing their housing wealth via a lifetime mortgage in the future and a further 3% said they had considered doing so in the past. The means almost a quarter (24%) of UK homeowners, or 3.4 million households are open to the idea of accessing their property wealth in retirement.
Legal & General entered the lifetime mortgage market in 2015 and became the largest provider of the product in H1 2017. Newly released figures now show that Legal & General Home Finance wrote a £1bn in lifetime mortgage advances last year.
Legal & General Retirement Retail chief executive officer Chris Knight said: “It’s no secret that lifetime mortgages have been growing in popularity in recent years, but as more and more Britons decide to access the cash tied up in their homes for retirement, no one has yet asked the question about the impact this newly unlocked equity is having on our economy.
“Our Silver Spenders research shows that homeowners aged over 55 are boosting UK gross output by up to £7.1bn, with the benefits being felt across industries ranging from construction and manufacturing to health and social services. Not only are these older homeowners accessing equity that would otherwise have remained locked up in their properties, whether for a holiday or a home renovation, but these funds are filtering through the economy as well. That is boosting the spending power of our businesses, generating jobs and spurring economic growth across the UK.
“With longevity increasing and awareness about lifetime mortgages growing, the role of equity release and its contribution to the national economy is set to grow further. Last year saw the sector surpass £3bn and a £5bn plus market is a strong possibility by 2020. But there is an estimated £1.5trn of property wealth in hands of Britain’s over-55s, so there is the potential for retirees and their housing equity to play a much bigger role in boosting UK GDP in years to come.”
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