A record average of £78,334 of equity was released by homeowners in July, suggesting property wealth is being used as a “back-up savings account”, Responsible Equity Release has said.
With the average UK salary just less than £28,000, the provider said homeowners released equity from their homes totalling almost three times the average annual wage in July.
It said this represented a 158% increase in the total amount of equity released compared to July 2016 and a 10% rise on the amount released in June 2017.
It found 41% more people took cash out of their homes in the last three months, compared to the three months prior.
The market “shows little signs of slowing down”, said Responsible Equity Release, as homeowners turn to property wealth to prop up savings accounts, pay off mortgages and cover pension shortfalls.
Indeed, research from Retirement Advantage found paying off an existing mortgage and funding home improvements to be the most popular uses for equity release.
The North East topped regional figures, as Responsible Equity Release said the equity released in July was three times (203%) that in June. Individually, North East homeowners released more than a third (37%) more equity in July versus June – from £24,173 to £33,112.
In Scotland, meanwhile, the total property wealth released in July went up by almost three-fifths (59%) on the previous month.
Equity release in London rose by nearly a fifth (17%) in the period, but the average amount fell from a peak of £208,500 in June to £175,744 last month. Responsible Equity Release said the fall in house prices in the capital could have resulted in more cautious borrowing.
It also found homeowners to be taking advantage of an additional borrowing facility which people can draw from if and when they need the money. Homeowners had arranged an additional £37,000 in funds on average as a drawdown facility, on top of the equity already released.
The provider’s managing director Steve Wilkie said: “People, especially those in retirement, are increasingly turning to their homes as a back-up savings account. With no signs that the Bank of England is going to hike interest rates anytime soon, low interest rates have killed the savings hopes of many.
“Equity release has established itself as a key financial product for thousands of people who are approaching retirement or have retired, and are now relying on their savings and investments, but unfortunately the income these investments generate doesn’t match their needs.”