Equity release hands UK economy a £3.8 billion boost in GVA

Spending funded directly by equity release also generates more than 45,000 jobs

Equity release hands UK economy a £3.8 billion boost in GVA

Older homeowners accessing the value held in their homes through lifetime mortgages and other forms of equity release are directly adding nearly £1.8 billion in gross value added (GVA) across the UK economy.

This was revealed in a new report from Legal & General and the Centre for Economics and Business Research (CEBR) that also found spending funded by equity release is further estimated to support nearly £1.1 billion in ‘indirect’ effects on GVA.

There is also £0.9 billion in ‘induced’ effects of equity release spending on GVA, bringing the total impacts on UK economic activity to £3.8 billion.

According to the report, a record £4.3 billion was released through lifetime mortgages and other forms of equity release in 2021 – an 11% annual increase.

Read more: Record number of equity release customers cash in property wealth in Q1 2022.

This money, previously tied up in the significant property wealth held by the UK’s over-55s, was then spent across a range of sectors as homeowners supported family members, achieved their goals, and boosted their incomes with the extra funding.

The wholesale and retail sector benefitted most from the extra cash unlocked, 18% of the total for £757 million. A significant share of the equity release funds, 12% or £517 million, was spent on the human health and social work sector, likely due to the significant care spend of this age group.

In addition to direct equity release spending across various sectors, the report also revealed the wider economic benefits generated as a result.

For example, money spent on home improvements, a common reason for taking out a lifetime mortgage, not only benefits the contractors completing the work but will also benefit their suppliers.

The report estimates the positive impact of equity release across supply chains and to employees supported just under £2 billion in GVA in 2021. This means that for every £1 spent as a result of equity release, a total of £2.12 in terms of economic activity was supported across the UK economy.

Read more: Equity release value in UK homes peaks in Q1 2022.

Through its contribution to the UK economy, equity release spending by homeowners also supports job creation in a range of sectors.

Spending funded directly by equity release generated more than 45,000 jobs. A third of this total, equating to 15,300 roles, are found in the health and social work sector, due to the high spend on care costs.

Considering the indirect supply chain effects, and induced effects of this spending, modelling undertaken by CEBR estimates that an additional 35,000 jobs are supported as a result of equity release’s impact on the economy.

Craig Brown, chief executive at Legal & General Home Finance, said that with the property market continuing to boom, the value held in the homes of the UK’s over-55s is both significant and growing.

“Complimenting this, over the past decade, the later-life lending market has seen improved standards and advice, and a growth in flexible products to meet customer need; giving homeowners confidence and security in making use of this asset,” he stated.

“Our research demonstrates that a growing number of people will look to their property wealth to fund their lifestyle, particularly in retirement. However, as this report demonstrates, 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,” Brown pointed out.

Legal & General commissioned CEBR for the Equity Economy 2022 report that analysed the equity release market in the UK. As well as drawing on existing data sources from the Equity Release Council and the Office for National Statistics, the report also gained fresh insight from a bespoke survey of more than 2,000 homeowners, of which 339 are equity release customers, undertaken between March 31 and April 07 by Opinium.