Pensioners Have All The Equity
For the past year, since the beginning of the credit crunch, we have all read and heard the reports about how much house prices have fallen across the UK and the worries many people with mortgages and home loans are having with regard to the potential for negative equity on their homes.
Although the various reports will state a wide range of figures for the amount of the decrease in house prices and the drops can alter dramatically form region to region, it is generally acknowledged that overall property prices have fallen consistently for the past twelve months, the only exception to this trend being London, which has seen a slight growth in house prices over the last three months.
Despite the recent property price reductions, the Prudential has released figures which estimate that retired home owners, aged 65 and over in the UK still have a total of £726.43 billion worth of equity which is currently locked up in their homes and, not surprisingly, somewhere in the region of forty per cent of this value is in London and the South East.
As the cost of living and inflation is increasing disproportionately and the value of peoples pensions are decreasing in real terms, many retired people are now turning to equity release loans and mortgages to help them fund their retirement plans, whether this is to supplement their income, or generate a lump sum to clear the balance of their existing mortgage or personal loans. The Pru reports that its equity release business has increased by 75 per cent over the course of the first six months of 2008.
A spokesman for the Prudential said “Although most retired home owners have seen the value of equity in their homes drop in the last few months, it is important that they do not lose sight of the bigger picture, which is that, despite current falling property prices, in the vast majority of cases retired homeowners have built up a significant amount of equity in their homes over a number of years. This, together with the rising cost of living, means that many more people are now looking to release equity from their homes to maintain or improve their standard of living in retirement.”
