While house prices have been rocketing, pension incomes have barely budged, leaving many older Brits struggling to make ends meet.
A new report by more2life has revealed the stark reality of pension incomes compared to house price growth. Over the last decade, average weekly pension income has only increased by a measly 1% after inflation. That’s a measly £29 increase, taking the average weekly pension from £320 in 2013 to just £349 in 2022. To make matters worse, pensions actually fell in 2022, dropping by £27 – the first decline since 2017.
House Prices Go Through the Roof
Meanwhile, average house prices have soared by a whopping 67% between 2013 and 2022. This means many homeowners over 50 are sitting on a significant amount of wealth tied up in their property.
Unlocking the Equity
So, how much equity do these homeowners actually have? JLL analysis of Bank of England data shows that a whopping 62% of UK owner-occupiers have at least 25% equity in their homes. That translates to a minimum of £70,165 in equity based on the current average UK house price of £280,660.
Equity Release – A Lifeline or a Trap?
This significant amount of equity could be a lifeline for pensioners struggling to make ends meet. Equity release schemes allow homeowners to access the money tied up in their property, providing much-needed income or funds for discretionary spending.
But before you rush into any decisions, Ben Waugh, managing director at more2life, warns that “borrowers should seek the expert guidance of an independent financial adviser”. He stresses the importance of understanding all options and choosing the one that best suits your personal needs.
What Does This Mean For You?
The stark reality is that many pensioners are facing a double whammy: stagnant pension incomes and soaring living costs. While owning a home provides a potential financial cushion, tapping into that equity comes with risks and requires careful consideration.
Before making any decisions, it’s essential to talk to a financial expert to weigh the pros and cons and make the right choice for your individual circumstances.