The Wealth and Assets Survey of Great Britain is conducted by the Office for National Statistics (ONS) every two years. The latest survey covers the period April 2016 to March 2018. Here is a quick review of some of its key findings along with a guide to its limitations and its real-world implications.
Overall property debt in the UK is on the rise
According to the Wealth and Assets Survey, total property debt in the UK is now £1.16trn. This figure is a 3% rise as compared to the last survey. The number of households with property debt also increased from 9.1M to 9.2M (approximately 1%) and the median household property debt increased by five per cent to £96,000.
NB: In the context of the Wealth and Assets Survey, the term “property debt” covers both mortgages and equity release secured on properties. This is technically accurate since the “lifetime mortgage” format of equity release is a debt secured against a property. It can, however, be different from most forms of debt in that there may be no repayments required during the borrower’s lifetime.
Property debt is concentrated in the middle wealth bands
The Wealth and Assets Survey placed each of its respondents into one of ten wealth bands. The top band comprised the wealthiest 10% of households while the bottom band was the poorest 10%. The survey found that in deciles four to seven, 45% to 54% of households carried property debt, whereas only two per cent of households in the lowest decile had property debt. The lower deciles were more likely to have financial debt (non-property-related debt).
Total financial debt rose by 11% or £12bn to £119B. This was mostly due to hire purchase and student loans. It should be noted, however, that student loan repayments are adjusted depending on income which makes them somewhat different to other forms of debt. In principle, it also means that repayments should always be manageable even if an individual’s financial circumstances change.
Four per cent of households were identified as having problem debt, although, perhaps surprisingly, this figure does not include mortgages in arrears.
The limitations of the Wealth and Assets Survey
The Wealth and Assets Survey does not split out equity release from mortgages, nor does it split out different kinds of mortgages e.g. investment versus residential or repayment versus interest-only. Likewise, the survey only expresses the amount of debt held by any given household. It does not express this data in comparison to the value of the property.
Last but by no means least, this Wealth and Assets Survey is a survey of UK households. It, therefore, does not include property debt held by companies as this is, by definition, not owned by a private individual even if they are the sole owner of the company in question. This means that it does not capture data relating to buy-to-let investors who work through a limited company.
Full details on the Wealth and Assets Survey and its methodology are available on the ONS website.
The practicalities of mortgage debt
While the Wealth and Assets Survey provides an interesting snapshot of property debt in the UK, it does not give any great degree of insight as to what it means in practical terms for each household. For example, although it collects data on property debt for each wealth band, it does not collect data on the percentage of a household’s income which is used to service the debt (which, in some cases may be none, since the survey counts equity release as property debt), or how much equity they have in the property.
Your property may be repossessed if you do not keep up repayments on your mortgage
For equity release products we act as introducers only. Equity release refers to home reversion plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration.
The FCA does not regulate some forms of buy to let mortgages