Older homeowners accessing the value held in their homes via lifetime mortgages and other forms of equity release are directly adding nearly £1.8bn in gross value added (GVA) across the UK economy.
GVA is the difference between the value of input, the materials, that go into a process, and the value of the finished product.
For example, if you spend £20 on wood and nails, then build a chair that is sold for £50, then you’ve added £30 in value during the process of building the chair, which is the GVA.
In the case of equity release, the input is taking the money out of your home, then spending it, the process, thus putting it back into the economy, the output.
Cash accessed through equity release indirectly supported a further £1.1bn in indirect effects, which are the increases in employment and economic activity along supply chains, and £900m in ‘induced’ effects, which include increases in employment and economic activity from increasing spending power of employees.
This amounts to nearly £3.8bn, according to Legal and General’s Equity Economy report, conducted with the Centre for Economics and Business Research (CEBR).
The study found that for every £1 of equity released via a lifetime mortgage, or other equity release product, £2.12 in GVA is supported across the UK economy. The report estimates the positive impact of equity release across supply chains and to employees supported just under £2bn in GVA in 2021.
A record £4.3bn was released in 2021 via lifetime mortgages and other forms of equity release, according to the report, representing an 11 per cent annual increase.
This money, previously tied up in bricks and mortar owned by the over-55s, was then spent directly across a range of sectors as homeowners supported family members and boosted their incomes with the extra funding.
The wholesale and retail sector saw most of the cash, at 18 per cent, or £757m, and the human health and social work sector got 12 per cent at £517m. The real estate and construction sectors received £356m and £417m respectively.
Spending funded directly by equity release generated more than 45,000 jobs. A third of this, 15,300 roles, are in the health and social work sector due to the high spend on care costs. Taking into account the indirect supply chain effects, and induced effects of this spending, modelling by CEBR estimates that an additional 35,000 jobs are also supported.
Craig Brown (pictured), chief executive of Legal & General Home Finance said: “With the property market continuing to boom, the value held in the homes of the UK’s over-55s is both significant and growing. The later life lending market has also grown in tandem, with improved standards and advice over the past decade.
“Our research demonstrates that a growing number of people will look to their property wealth to fund their lifestyle, particularly in retirement.
“However, the impact of the equity release market is more significant than just the spending power it gives to the individual homeowner: it funds businesses, creates jobs and makes a positive contribution to the UK economy.”
Since 2015, Legal & General has helped over 108,000 customers release more than £6bn in property equity.