Despite the recent slowdown in house price growth, homeowners who are 65 years or older and who have successfully paid off their entire mortgage have still been able to benefit from a £45.7 billion increase in housing wealth between May 2017 and May 2018. This has resulted in an overall estimated property wealth of more than £1.1 trillion among this group, Key's latest Pensioner Property Index reveals.
On average, this means a retired homeowner has 'made' about £812 per month since May of last year, simply thanks to property value increases. So, if you've paid off your mortgage and your home was worth £200,000 last May, you could now sell it at £209,744, depending on where you live – that's how property wealth increases occur.
The homeowners who've seen the biggest gain over the last year are those in the East Midlands, with their property wealth up by nearly £1,170 per month. This is closely followed by those in the West Midlands (£1,002 per month), Scotland (£989 up) and East Anglia (£973). Additionally, no regions have seen a fall in property wealth, so it's highly likely that just about everyone's seen the value of their home increase.
"Whatever the short-term changes in house prices, many over-65s have considerable property wealth, which can make a huge contribution not only to their standard of living in retirement but also the financial wellbeing of family members," commented Dean Mirfin, chief product officer at Key.
Indeed, an increasing number of retired homeowners are choosing to use equity release to take some of that increased wealth from their properties and help their offspring with expenses such as weddings or even taking their own step onto the property ladder. Of course, before agreeing to this kind of product it's important to speak to an independent adviser, as it would affect the inheritance you'd be able to leave behind.
However, not every over-65-year-old will have paid off their mortgage yet. The figures show that the North West has the highest number of people over 65 who own their home outright, followed by the South East and South West. There are an estimated 4.7 million retirees lucky enough to own their own home overall.
Those retired homeowners who have yet to pay off their mortgage may want to check if the increased property wealth sees them eligible to go down a loan-to-value (LTV) tier. A mortgage with a lower LTV could save them in monthly repayments – provided they find the right mortgage deal.
Finally, the increase in property wealth for older people does unfortunately also mean that those trying to get onto the property ladder will need a larger deposit. They may be applying for much more modest homes, but the still-increasing house prices tend to drive up the whole market. That may be why more youngsters are now reliant on their parents using equity release or other means to help them join the property-owning side of the equation.
For more information on equity release, see the comprehensive guide under the lifetime mortgages table here
Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.