UK household wealth close to £8 trillion
10 May 2014
- Total household wealth up by over £3 trillion since 2003 or £96,000 per household
- Household wealth grows faster than disposable income and inflation
- Financial asset value rises as housing wealth drops
According to latest research from Lloyds Bank Private Banking total household wealth1 at the end of 2013 is estimated to have reached £7.84 trillion, an increase of £3.07 trillion over the past decade; equivalent to a rise of £96,000 per household.
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%) than either gross household disposable incomes (44%) or the consumer price inflation (30%) since 2003 (Table 1).
Over much of the past decade housing wealth has fallen in importance relative to financial wealth. Housing now accounts for 42% of total wealth compared with 45% in 2004. Conversely, the proportion accounted for by financial assets has risen from 55% to 58% between 2004 and 2013.
Ashish Misra, Head of Investment Policy at Lloyds Bank Private Banking, commented: "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 £717 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."
Rise in financial assets boosts increase in household wealth since 2003
Total financial assets, including bank and building society deposits, government bonds, shares in listed companies, life assurance and pensions, increased in value from £2.68 trillion in 2003 to £4.52 trillion in 2013. This contributed the largest amount to the overall increase in household wealth; £1.85 trillion or 60%.
Of that, over half (56%) of financial assets are tied up in life assurance and pensions fund (LAPF), and a further 22% is in the form of deposits held with financial institutions and National Savings . These shares have remained steady over the past decade.
Housing wealth up by £1.22 trillion in the past decade
With the increase in the value of properties (£1.72 trillion) almost three and a half times the rise in mortgage debt (£503 billion), housing wealth as a result has grown by £1.22 trillion (58%) since 2003.
In the past decade, the value of mortgage debt has grown from £775 billion to £1.3 trillion, a rise of 65%. Average annual growth in mortgage debt has slowed to just 1% since 2009, compared to 12% 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.