Homeowners in England and Wales aged 65 and over have retained £611 billion of equity in their property and a further £43 billion is held in Scotland as the housing market begins to show signs of stabilising following two years of decline, according to the latest findings from Prudential’s Equity Release Index.
The Index also shows modest gains for homeowners aged over 65 in Wales, the West Midlands, London and the North West.
In Wales, the over-65s saw values rise by £3,448, followed by London’s over-65s who gained £3,296, while in the West Midlands retired homeowners gained £2,789 and the North West saw increases of £818.
Homeowners in Scotland aged 65 and over have retained £43 billion of equity in their property as and saw modest gains in the second quarter of 2009, with an average increase in property values of £5,235 since March, although the total value of property equity for the over-65s is still more than £3 billion lower than it was a year ago.
Scotland home equity stronger than England and Wales
The Prudential Equity Release Index shows that, in the second quarter of 2009, Scottish over-65s saw the value of the equity in their homes increase by 3.7 per cent. Over the same period, the equity in homes owned by over-65s in England and Wales remained almost level, decreasing by just 0.03 per cent.
Property values fall just £43
The picture across England and Wales as a whole is one of stabilisation, with property equity for the over-65s falling by less than £43 since February – the lowest fall recorded by the Prudential Equity release Index.
The recent fall of just £43 contrasts sharply with the period between October 2008 and February 2009 when property equity in England and Wales for homeowners aged 65 and above dropped by an average of £21,377.
Property equity can provide a valuable source of retirement funds, especially against a backdrop of low interest rates and equity price falls in the past two years which have hit pensioners’ non-pension savings.
Prudential’s Index reveals that the value of property equity belonging to homeowners aged 65 and over fell by just £161.6 million between February 2009 and June 2009, compared to a drop of more than £80 billion from October 2008 to February 2009.
North East homeowners aged 65 and above saw the highest decline for any region in England and Wales with equity in their homes falling by £4,857 compared with £18,721 from October 2008 to February 2009, while those in Yorkshire and Humberside experienced a decrease in value of £4,209, compared with £13,028 from October 2008 to February 2009.
Keith Haggart, director of lifetime mortgages at Prudential, said: "A good many pensioners will be cheered by the news that property values appear to be stabilising and in some parts of the country are even increasing. This could bode very well for people considering using their home as an asset to boost retirement income.
"Of course falling property prices have affected every homeowner but it’s important to remember that many homeowners now aged 65 and above bought their homes years ago and have benefited from longer term growth in the housing market. Many people in this age group have lived in their home for twenty years or more. The fall in house prices over the last couple of years appears to have slowed and, if house prices do rise in the future, the retired population could expect to see their wealth increase.
"For many people, selling up and downsizing isn’t an especially attractive option, and they don’t want to face the emotional wrench of moving house. Equity release has an important role to play in providing retirement funds particularly when other sources of income are under pressure."
Equity release schemes can be an excellent way to help retirees to secure additional funds for retirement, either as an income or lump sum, and any provider who is SHIP registered provides a no-negative equity guarantee as well as guaranteeing that the mortgage interest rate is fixed for the term of the loan.
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