It’s been hard to escape the news throughout the year of soaring house prices, and the challenges that people have been finding when trying to enter the housing market (or continue their journey through it).

At its peak there were countless stories of people camping outside estate agents to buy new-build properties off plan, or of open days and final-offer bidding systems being held on what would previously have been regarded as average suburban houses and while many suspected that this was due to the stamp duty holiday, the market has continued its onward trajectory even after the holiday ended owing to the ongoing ‘race for space’ (i.e. a high demand for larger properties with gardens).

Naturally, any movements within the property sector impact the later life lending space, so what effects are currently being felt – and what can we potentially see going forward?

One of the main things has been the way that downsizing has started falling out of favour with those in later life. While it’s historically been an alternative to later life lending for those seeking to shore up their finances, research by Hargreaves Lansdowne has shown that only 14% of 55-64 year olds would now consider it. While emotional attachment to a property remains a key factor for this reluctance, the rising house prices mean that those seeking to move to a smaller but more urban property will now see any benefit eroded. Additionally, around one in ten of those surveyed didn’t believe they’d make enough money from downsizing, while almost a quarter felt the associated costs could make it too expensive.

Unsurprisingly, rising house prices and the effect it’s had on first-time buyers being able to enter the market has also contributed to a rise in the amount of gifting and living inheritances being given by older generations, and consequently being listed as a key reason for releasing funds. According to data released earlier this month, 73% of cash released was used to either clear existing debts or help out families financially with gifting itself continuing to hover around the 20% mark in Q3 despite the end of the stamp duty holiday. Around 42% of gifted funds was used for house deposits, owing to rising house prices – Halifax estimates on average they’ve increased by £31,500 over the course of the pandemic to date.

Rising house prices have also contributed to the changing face of the average equity release consumer, with the average home value for a lifetime mortgage borrower reaching £539,844 in October, a year-on-year rise of over £85,000. This represents an 18.5% rise on 2020 figures, and 31% compared to 2019, with 16% of all properties used to secure a lifetime mortgage now exceeding £750,000 in value – perhaps as a consequence, the £115,000 release amount has risen 9.3% compared to 2020, and nearly 43% higher than in 2019. However, Responsible Life, along with their data, do point out that these trends can’t entirely be explained by house price rises, as they exceed the rates at which house prices have risen, and point to a ‘middle class stampede’ as equity release becomes an increasingly mainstream retirement solution.

Nonetheless, it’s undeniable that movements within the property market have the ability to affect and steer the equity release market – whether that’s through people’s willingness to downsize, their intended use of funds, or the possible changes in the market’s customer profile. It makes for an interesting narrative and certainly one that we – along with the rest of the market – will be keeping an eye on.

For more commentary about market trends in the retirement and equity release spheres, please do explore our free-to-access Quarterly Market Reports and series of Insight blogs.