The significant amounts of property equity contrast with the current squeeze on retirement income being seen in today's volatile market and economic conditions where rates on annuities and income drawdown products are falling.
Individuals buying guaranteed annuities, for example, have seen rates fall by up to 10 per cent since the middle of last year and Prudential believes this fall emphasises the need for pensioners to look at all potential sources of retirement income.
Property equity can deliver a valuable income, especially against a backdrop of low interest rates and equity price falls of around 30 per cent in the past two years which have hit pensioners' non-pension savings.
Prudential's Index, which tracks the amount of equity held in the properties of people aged 65 and over in England and Wales, found that 42.5 per cent of this equity belongs to those living in London and the South East.
Household equity and ownership for over 65 year olds
Region - Estimated property equity in homes owned outright by people aged 65+ (February 2009)
London £137.3 billion - South East £122.0 billion - South West £64.6 billion - East £57.5 billion - North West £60.5 billion - Yorks/Humbs £43.9 billion - West Midlands £46.6 billion - Wales £26.6 billion - East Midlands £34.5 billion - North East £18.0 billion - England & Wales £611.5 billion
Prudential's Index reveals that the value of property equity belonging to homeowners aged 65 and over fell by £80.6 billion between October 2008 and January 2009, with the average homeowner over 65 seeing the value of equity they have in their home fall by £21,377.
London homeowners aged 65 and over saw the highest decline for any region in England and Wales with equity in their homes falling by £38,057 while those in Yorkshire and Humberside experienced a decrease in value of £13,028.
Still ‘considerable wealth' in property
Keith Haggart, Director of Lifetime Mortgages at Prudential, said: "Every homeowner is being affected by falling property prices, but it's important to remember that many people, especially retired homeowners, bought their homes years ago and have benefited from growth in the housing market. Even in this depressed market, the vast majority of retired homeowners still have considerable wealth tied up in their properties.
"They will in many cases not want to move home and in the current market the option of downsizing and raising money is less attractive when prices are falling and houses take longer to sell. The emotional wrench of moving house may be worsened by the financial loss of having to cut your price in a slow market.
"Equity release has an important role to play in providing retirement income particularly when other sources are under pressure.
"Annual figures from SHIP show that equity release sales in 2008 were almost £1.1 billion and were just nine per cent lower than 2007, despite the collapse in the wider mortgage market."
Equity release schemes can be an excellent way to help retirees to secure an income, and any provider who is SHIP registered provides a no-negative equity guarantee as well as guaranteeing that the mortgage interest rate is fixed for the term of the loan.
