The Impact of Rising House Prices on Equity Release in Jan 2022

Rising House Prices: A Game-Changing Matter for Equity Release

Contributors: Nicola Date, Katherine Read. Reviewed by Francis Hui

Rising House Prices Have Been a Boon for the Property Market, but With Many Homeowners Struggling to Make Their Mortgage Payments This Is Not Good News. So What Does It Mean for Equity Release?

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The Impact of Rising House Prices on Equity Release

Rising house prices have been a boon to the property industry for many years now, but what does this mean for equity release? Equity release schemes are becoming increasingly popular as the cost of living and homeownership both rise.

This article will discuss how rising house prices could impact equity release and look at how you can secure your finances in retirement.

Continue reading to find out more!

How Does Rising House Prices Affect the Equity Release Market?

Great news!

Rising housing prices mean that homeowners have the opportunity to release more equity from their homes!

You might find attractive interest rates as the Loan to Value (LTV1) amount will increase.

In addition, if the market value2 of your home increases significantly in the period between when you take out a loan and when your plan comes to an end, your family could really benefit.

For example, if prices increase by 25% over five years while your fixed interest rates remain unchanged, then there might be leftover funds when your house is sold, once the loan, plus interest has been covered.

If you’re considering borrowing against your property through equity release, make sure that you understand how changing market conditions or interest rates can affect what you owe.

Pro Tip: Releasing too much equity could mean that your family will be left with no inheritance if property prices crash when your home is sold.

Find out more about: The Pros and Cons of Equity Release.

rising house price on equity

Why House Prices are Rising

Rising house prices are a consequence of the demand for housing outstripping supply, as well as inflation. Inflation is the rising price of goods and services, which all sorts of factors can cause. One such factor could be a country’s monetary policy3 strategy to maintain low inflation rates.

In recent months there has been strong demand from buyers for property in many parts of the UK, including London, where prices have risen significantly since 2017.

This trend will likely continue into 2021 as long as lifetime mortgage interest rates remain at historically lows levels – something which may not always be the case! Higher than average wage growth also means people are more able to afford houses too.

A lack of new properties coming onto the market is another issue: look how few homes were built during Margaret Thatcher’s era when she tried unsuccessfully to ‘right size’ housing provision.

The result has been that a lack of new homes built in the 1980s and 1990s means there is now an undersupply, and this will continue until more properties are due for completion.

What Rising House Prices Means for Equity Release

The increase in house prices is not just good news for the property market. People are increasingly turning to equity release schemes as they struggle with high living costs and lower pensions income due to increased life expectancy and low-interest rates on savings accounts.

As people live longer than ever before, it’s important that their finances remain secure in retirement – this may mean drawing down pension incomes or taking out loans against a home’s value (or both).

In addition, some older homeowners who bought their homes decades ago will have had little time since then to build up more assets.

These homeowners should consider requesting smaller payments over longer periods if entering into any agreements about future repayments of debt.

why people need it

Common Questions

Should I Take Out an Equity Release Scheme Now That House Prices Are Rising So Quickly?

How Do Changing Market Conditions or Interest Rates Affect My Home Loans?

How Could Housing Market Conditions Affect the Number of Mortgage Repayments?

In Conclusion

Rising house prices are great news for homeowners, particularly those looking to release equity from their homes. Your increased property value means that you can access more money than you could ever before.

Additionally, your family might end up paying less for your home when you pass away or move into permanent care. Have a look at what happens to equity release when you die to learn more.

Editorial Note: This content has been independently collected by the SovereignBoss advisor team and is offered on a non-advised basis. Sovereignboss may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.

rachel w

Rachel Wait
Personal Finance Journalist

Rachel is an experienced finance journalist and editor with a particular interest in personal finance and consumer affairs. She has vast experience writing about money issues, property, insurance, and consumer affairs, and you’ll find her articles regularly featured in top media and newspaper publications.
john lawson profile.jpg

Written by
John Lawson
Founder SovereignBoss

John is passionate about education and has made it his life-long mission to assist UK citizens on their future financial options, with a specialist interest in equity release, and SovereignBoss is the natural extension of this passion.

Reviewed by
Francis Hui
Senior Risk Manager

Having held various high-level roles across the industry, Francis is truly an expert in aiding UK citizens in their financial decisions and risk analysis. His unique insight and statistical knowledge make him the perfect person to help you take your financial future to the next level.
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Katherine Read
Consumer Affairs Writer

Since joining the editorial team at SovereignBoss, Katherine has become focused on bringing transparency to finances and opportunities for those approaching retirement age. She writes on the topics of equity release, home reversion, and mortgages.

Nicola Date
Writer & Journalist

Nicola is a financial writer for SovereignBoss and is passionate about the opportunities that equity release can open up for homeowners. Her extensive business experience and deep understanding of the industry means that she’s always up-to-date with the latest developments.

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