Reluctance to downsize bolsters equity release
The highly emotive subject of downsizing is set to fuel increased interest in equity release options, Just Retirement has claimed.
Stephen Lowe, group director of external affairs at the provider, said the high financial and emotional costs of selling a family home and moving into a smaller property would push families towards withdrawing equity from their homes.
Just Retirement’s recently unveiled study into consumer attitudes towards equity release - The Role of Housing Equity in Retirement Planning found that 51 per cent of the 1000 homeowners over 55 who were polled, were against moving out of the family home.
55 per cent had lived in their homes for more than 25 years and a further 24 per cent had bought between 16 and 25 years ago.
Mr Lowe said: “The traditional view is that downsizing is a way older people can free up some capital and cut their living costs. It is only when you question those people thinking about going through with it that you get a sense of how reluctant they really are.
“What seems an easy financial decision from a financial point of view is often a huge emotional wrench that people seem keen to avoid.
“As people age, they appear to get more reluctant to sell up and move to a smaller home. Of those with between with between five and one year to retirement, about half would rather sell up than use equity release, but this number fell to just over a third of those actually in retirement.
“There was a widespread feeling that downsizing was a major upheaval and probably worked best if people did it relatively early in retirement or in response to poor health, but interestingly, a few had downsized and been disappointed by the results after the costs were taken into account.
“People were also very aware that there are a lot of retirees have the same idea and there is a very restricted supply of the right kind of homes in the right areas. This is not just a consequence of the current slow market.
“A home is usually someone’s biggest asset and it does make sense to use some of the value tied up in it to underpin a more acceptable retirement. Equity release offers a quick way for those who can’t or don’t want to move to generate a lump sum or income.
“This is wealth they have accumulated over the long-term and they are naturally keen to want to choose how best to use it.”