Rising house prices have been making headlines for years, and we all know that purchasing a home in London is likely to need a substantial mortgage. Yet, figures showing how much properties in Great Britain are now worth could still surprise you.
According to data from estate agents Savills, the number of £1 million homes increased by 22% in 2021.
While there were concerns the pandemic would lead to falling house prices, the opposite was true. High demand and a Stamp Duty holiday meant house prices climbed by an average of 9.7% in the year to January 2022.
The rise means that in the space of a year, there were almost 129,000 new property millionaires.
2.4% of all homes in Great Britain are valued at more than £1 million
In total, the research estimated that almost 690,000 residential properties in Great Britain are worth at least £1 million. To put that into context, it’s around 1 in 42 homes.
Unsurprisingly, London continues to have the highest percentage of £1 million homes, but the research also shows the trend is spreading beyond the capital. The data shows:
- Around 1 in every 11 homes in London is valued at more than £1 million.
- The number of property millionaires in Wales has increased by 63%.
- There are almost 10,000 property millionaires in Scotland after an annual increase of 31%.
- In absolute terms, south-east England had the largest increase in £1 million properties with more than 44,000 homeowners seeing the value of their property tip over £1 million.
While £1 million properties still represent a relatively small proportion of the housing stock in Great Britain, homeowners are likely to have benefited from rising house prices.
Data from the Halifax House Price Index finds that the average property was worth more than £278,000 in February 2022 after annual growth of 10.8% – the strongest since June 2007.
If you’re a homeowner, the increase in the value of your home may seem abstract, but it can provide you with greater financial freedom.
3 ways rising house prices can help homeowners
1. Increased profit if you sell your home
When considering how rising house prices benefit homeowners, you’d probably first think of the profit that you’d make if you sold the property.
While there have been times when house prices fell in recent decades, most notably during the 2008 financial crisis, there has been an upwards trend.
Between January 2002 and January 2022, data from Land Registry suggests that the average home has increased in value by more than £177,000. That’s a sizeable profit you could make by selling your home.
Of course, in many cases, you’d also need to purchase a new property to live in. However, if you choose to downsize or move to a region with lower property prices, you could release profit from your home.
2. It could lower your mortgage repayments
If you’re paying off a mortgage on your home, rising house prices could mean you can take advantage of a lower interest rate. This could reduce your repayments and the cost of borrowing over the rest of your mortgage term.
When you take out a mortgage, lenders consider your loan-to-value (LTV) ratio. This compares how much you owe on your mortgage to the value of the property. The lower the LTV, the more equity you own and the lower the interest rate lenders are likely to offer you.
So, as you pay off your mortgage and the value of your property increases, you may be able to access a lower rate of interest that will save you money.
If your current mortgage deal has come to an end, it’s worth having your home valued and seeing what other deals are on the market. We can help you find a mortgage that’s right for you.
3. Release equity from your home to fund retirement
As well as pensions and other savings, your home may be a useful way to fund retirement. However, there are drawbacks that you need to carefully consider.
Equity release can allow you to access some of the wealth locked away in your property while remaining in your home until you pass away or move into long-term care. It can provide your retirement with a financial boost and give you greater freedom.
While equity release can be tempting, you should keep in mind that you will need to pay interest on the amount borrowed, and because this is often rolled up, the amount owed can rise quickly. As a result, it can reduce what you leave behind for loved ones and may limit your options later in life.
You need to weigh up the pros and cons of equity release before you decide what to do. So, seeking advice can ensure you understand the potential implications.
If you’re a homeowner and want to take out a new mortgage deal or explore your other options, please contact us.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
Equity Release will reduce the value of your estate and can affect your eligibility for means-tested benefits.
