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Surge in house equity release in UK as over 55s cash in on property wealth
Equity release lending to UK home owners over the age of 55 totalled £384.3 million in the second quarter of 2015, the largest amount for any quarter since records began. The latest data from the Equity Release Council show that this surpasses the previous high of £375.4 million reached in the third quarter of 2014 and that the over 55s withdrew £4.2 million of housing wealth every day from April to June. This uplift comes despite savers gaining greater access to their pension pots under the freedoms launched on 06 April. With house prices rising again, it shows the growing appeal of using property wealth as an extra source of retirement income in later life, according to the report. Also, record lending in the second quarter meant the total value of equity released in the first six months of 2015 hit £710 million, the largest sum on record for the first half of the year and an 11% increase on the first half of 2014. There were 5,414 new equity release customers in the second quarter of 2015, an 11% increase on the last quarter, pushing the total number of new customers past 10,000 for the first six months of 2015. The value of lending, via lump sum lifetime mortgages, increased by 10% year on year in the first half of 2015 to reach £285.3 million, the highest total for lump sum activity in the first half of any year since the first half of 2007 when the value hit £355.9 million. However, the value of lending via drawdown lifetime mortgages surpassed this rate of growth, rising 12% year on year from £379.2 million in the first half of 2014) to £423.5 million in the first half of 2015. The data shows it also rose faster from the first to second quarter, at 21% compared with 14% for lump sum products. The Council says this was as customers took advantage of the flexibility to withdraw their housing wealth in regular instalments rather than as a one off amount. Home reversion plans account for less than 1% of the overall equity release market, yet these too saw an increase of 18% in lending from £534,765 in the first quarter of 2015 to £632,647 in the second quarter. ‘The last three months have been a landmark period for UK retirees and those approaching retirement, and equity release activity continues to grow amid a sea of change. There is no doubt the pension freedoms have created more options for people to consider, but the appeal of tapping into housing wealth is on the rise as older consumers seek to make use of all the assets at their disposal,’ said Nigel Waterson, chairman of the Equity Release Council. ‘Doom and gloom often surrounds discussions on retirement income, but while contributions to pension pots remain low, an entire generation of home owners have been paying into property their whole lives… Continue reading
Most accountants in UK think stamp duty property tax is still unfair
The majority of accountants in the UK still believe that the stamp duty regime on residential properties is unfair, despite the reforms announced by the Chancellor last year. The new system introduced in December overhauled how HMRC calculated stamp duty with the tax now only applying to the amount of the purchase price which fell within that particular duty band. This prevented purchasers of property valued slightly above a particular threshold being hit with a sudden increase leading it to be criticised as an anomalous ‘slab tax’. However, some 55% of accountants still believe the system is unfair, according to research from Bloomsbury Professional, a leading tax and accounting information group. Of these, the largest proportion, 22% argued that stamp duty ought to be set more locally, to reflect regional conditions and enable it to be used, for example, as a measure to either boost or control local property markets. A further 20% of accountants felt that stamp duty remains too high overall whilst 13% felt that the tax is too high for more expensive properties. ‘It is significant that the greater proportion of accountants still feel that the stamp duty system is in need of an overhaul. The recent Summer Budget did not address the imbalances that many accountants feel is impacting the residential property market,’ said Martin Casimir, managing director of Bloomsbury Professional. ‘The calls for stamp duty to be set locally are intriguing. The impact of such a change and how it could best be implemented is up for debate but it certainly shows that the devolution debate is becoming part of business’ mainstream thinking,’ he added. When the new stamp duty rates were announced the government stated that 98% of home owners would pay less after the charges and only those buying properties worth more that £937,000 would pay more. HMRC collected £10.7 billion in Stamp Duty tax in 2014/2015, a 36% increase over three years from £6.9 billion in 2012/2013. Continue reading
UK house price sentiment dips slightly
The UK’s residential property market is likely to see continued house price momentum in the second half of 2015 but sentiment is down from last year’s highs, the latest index shows. Households still believe the value of their homes is rising and the July House Price Sentiment Index from Knight Frank and Markit Economics has now been in positive territory for 28 months in a row. However, July’s reading of 58.6 was a slight decrease on the 59.5 recorded in June, but it was still the second highest reading so far this year, an indication that households across the UK are still confidence that house prices are rising. Tim Moore, senior economist at Markit Economics, pointed out that UK house price sentiment in July was comfortably above the year and a half lows seen during February. ‘A gradual rebound in households’ property value perceptions has been underpinned by strong demand conditions so far this summer, alongside an underlying lack of supply and the continued low mortgage rate environment,’ he explained. He believes that these factors are likely to support house price momentum through the second half of 2015, but added that tighter mortgage lending rules and stretched affordability have brought down UK households’ expectations of future house price growth from last year’s record highs. Indeed, the future HPSI, which measures what households think will happen to the value of their property over the next year, fell marginally in July to 70.2, from 70.5 in June. On a rolling three monthly basis to July the future HPSI is 70.2, the same as the previous three months, an indication that expectations for future house price growth have flat lined. ‘Overall expectations for future house price growth remain firm, underpinned by a strengthening labour market, improving economy and ultra-low mortgage rates,’ said Grainne Gilmore, head of UK residential research at Knight Frank. ‘There is now more discussion about possible interest rate rises, but this, as well as the property tax announcements in the Summer Budget, has had little impact on average expectations for the direction of travel for house prices,’ she explained. ‘However, there are regional differences in the data, with the widest spread between the future HPSI reading in the North East and London than at any time since March last year, reflecting the differing dynamics of housing markets across the country, with local economic factors leading to a disparity in the levels of house price growth,’ she added. Continue reading
