Sat, 10/05/2014 - 09:00
Total UK household wealth at the end of 2013 is estimated to have reached GBP7.84 trillion, an increase of GBP3.07 trillion over the past decade, equivalent to a rise of GBP96,000 per household.
That is according to the latest research from Lloyds Bank Private Banking.
Due to a combination of rising property prices, and the value of people’s financial assets, including bank deposits, shares and pensions, the value of household wealth has grown at a faster rate (64 per cent) than either gross household disposable incomes (44 per cent) or the consumer price inflation (30 per cent) since 2003.
Over much of the past decade housing wealth has fallen in importance relative to financial wealth. Housing now accounts for 42 per cent of total wealth compared with 45 per cent in 2004. Conversely, the proportion accounted for by financial assets has risen from 55 per cent to 58 per cent between 2004 and 2013.
Ashish Misra, head of investment policy at Lloyds Bank Private Banking, says: "The long uninterrupted period of economic growth from 1992 to 2007 brought about a large increase in household wealth in the UK. A booming housing market coupled with rising equity prices have resulted in a rapid expansion in the number of millionaires. The financial crisis and recession did, of course, interrupt this rise in household wealth.
"However, in the past year household wealth grew by GBP717 billion, the largest annual rise in the decade. Increasing activity in the housing market and continued growth in equity prices has boosted household wealth. These figures, to an extent, provide further evidence that the recovery in the UK economy is gathering pace."
Total financial assets, including bank and building society deposits, government bonds, shares in listed companies, life assurance and pensions, increased in value from GBP2.68 trillion in 2003 to GBP4.52 trillion in 2013. This contributed the largest amount to the overall increase in household wealth; GBP1.85 trillion or 60 per cent.
Of that, over half (56 per cent) of financial assets are tied up in life assurance and pensions fund (LAPF), and a further 22 per cent is in the form of deposits held with financial institutions and National Savings. These shares have remained steady over the past decade.
With the increase in the value of properties (GBP1.72 trillion) almost three and a half times the rise in mortgage debt (GBP503 billion), housing wealth as a result has grown by GBP1.22 trillion (58 per cent) since 2003.
In the past decade, the value of mortgage debt has grown from GBP775 billion to GBP1.3 trillion, a rise of 65 per cent. Average annual growth in mortgage debt has slowed to just one per cent since 2009, compared to 12 per cent per year between 2003 and 2007. Low mortgage rates, as well as lower levels of house purchases made with loans have both contributed to easing the overall mortgage debt burden in the past five years.
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