Mortgage repayments soar 20% to reach record £38bn in H1

Total mortgage capital repayments have risen by 20% year-on-year to take the total amount of debt repaid in the first half of 2021 to £38bn, a new report from the Equity Release Council has revealed.

This figure is equivalent to £200m a day or £3,500 for every mortgaged household.

The Council said the trend has been fuelled by regular repayments and overpayments reaching record heights, as well as new borrowing ahead of the stamp duty deadline, and fewer mortgage payment holidays.

According to the Council’s Autumn Market Report, the housing market has seen UK private property wealth increase from £4.21trn at the end of H1 2020 to an “unprecedented” £4.87tn at the end of H1 2021. The overall value of UK housing stock also climbed from £5.67tn to £6.42tn over the last year, with households repaying more than £19bn of mortgage capital during both Q1 and Q2 2021, having never repaid more than £18bn in any previous quarter.

Rising property prices mean that more than three quarters of the value of the average home is now tied up in equity rather than debt, leaving an average £201,642 of property wealth for its owner to draw on.

“UK households are converting unprecedented amounts of mortgage borrowing into property wealth as we look to move on from the worst of the pandemic,” said Equity Release Council chairman, David Burrowes.

“Combined with property price rises fuelled by the stamp duty holiday, homeowners have record equity to potentially draw upon in later life.”

He added: “The modern equity release market has shown resilience in the face of uncertainty to climb back towards pre-pandemic levels. The disruption of the last 18 months has not slowed the pace of innovation in lifetime lending, and it is important the market continues to evolve to address the financial challenges people will face in the post-pandemic world.”

The Council’s findings also revealed that the first half of the year has seen 35,860 new and returning customers served, unlocking £2.3bn of property wealth to support their finances.

According to the report, the total number of equity release products available increased to a record high of 668 in July 2021, up from 448 six months earlier. The total means that customers now have access to more than double (127%) the number of product options than two years ago.

Key CEO, Will Hale, added: “It is good to see growth in the range of flexible features available across different lenders and products.

“We know that there is appetite from customers to mitigate the impact of interest roll-up through the use of interest-served and ad hoc capital repayment options, and other customers value the added reassurance of being able to leave a guaranteed inheritance or benefit from downsizing protection.

“Equity release is truly a multi-use product and, rather than being regarded as a ‘last resort’, is now part of the mainstream retirement landscape and is being used by a broader universe of advisers to support a wide range of different customers achieve their wants and needs in later life.”

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