Is it always a good idea to get excited about UK house prices going up? Maybe, but then again maybe not. At first glance, more positive equity in your home has to be a good thing – but not everything’s as clear cut as that, as our latest Family Finances Report explains.
On the upside
Reassuringly, our Family Finances Report shows that, at the moment, families can for the most part look forward to releasing positive equity if they’re in the market for a move.
Compared to December 2013, the average amount of equity in UK homes has increased in recent months. It’s gone up from £153,009 to £155,579. But the reality is, the house you buy may have gone up in price too – so while it’s true that you’ll be gaining on the one hand, there’s only a relative gain on the other.
And on the downside
Alongside the upward trend in most areas though, we’re also seeing a rise in outstanding mortgages. The average debt owed now is £100,814, compared with £94,865 last year – and that’s a significant change in direction since December 2013. Then, we reported families with mortgages owing less than at any point since 2011. So why the shift?
Well, it could be that disposable income was going into an increase in mortgage repayments previously: people were taking advantage of relatively low interest rates. It is also possible some families are remortgaging, getting more favourable rates and releasing equity as cash at the same time.
Keeping a level head
The appeal of ‘moving on and moving up in the world’ is hard to ignore, particularly if an equity situation makes it relatively easy to do so.
But what’s certain is that, with any overall increase in house prices, there’s an associated increase in the amount of money needed to buy those houses: anyone who’s starting out on the property ladder needs a bigger step up, a larger deposit, and a more sizeable loan to get that first home. And with increases in debts come higher levels of responsibility: it’s one of the reasons we’re so emphatic about the need for appropriate life insurance.
No matter how small or large a family home may be, if something happens to the breadwinner there’s always a price to pay. We defined six types of family for our Family Finance Report. But we hope that families in all circumstances will consider revising life insurance on a regular basis, as their property and assets fluctuate in value over time.
The Aviva Family Finances Report is an in-depth study into the financial needs of the 84% of the UK population who live as part of a modern family. Based on customer profiles and Government data, Aviva recognises the six most common types of modern family as being:
• in a committed relationship with no plans to have children;
• in a committed relationship with plans to have children;
• in a committed relationship with one child;
• in a committed relationship with two or more children;
• divorced/separated/widowed with one or more child;
• or a single parent raising one or more child alone.
Data was sourced from the Aviva Family Index, using responses from over 22,000 people identified as above, via Canadean research. This report looks at not only personal wealth, income sources and expenditure patterns but also tracks how these change across the different types of family unit.
In each edition, Aviva highlights a different topic. This issue has a focus on the lifestyles and working habits of UK families across different generations over the last 50 years. This ‘spotlight’ section uses data compiled from interviews of parents who had their first child between 1965 and 2014, comparing attitudes of 1,103 parents of Generation X (born 1965-1980); Generation Y (born 1981-2000) and Generation Z (2001-2014).