Mortgages  

Lack of new homes put off equity release downsizers

Lack of new homes put off equity release downsizers

Around one in five clients have inquired about downsizing their house to release equity with their financial advisers, according to Bower Retirement Services.

However, the specialist provider’s survey of 98 advisers in July found a lack of available homes to buy and the cost of moving were major barriers to moving into cheaper properties.

Nearly half of advisers (47 per cent) questioned said clients could not find suitable homes, while 37 per cent blamed the cost of moving and feared they would not make enough money.

Article continues after advert

Bower pointed out this struggle is reflected in recent Land Registry data showing property sales in England and Wales fell 15 per cent in February to May compared to the same three months a year ago.

One of the biggest drops was in the number of sales of houses valued between £200,000 and £250,000 - which fell by 26 per cent.

Andrea Rozario, chief corporate officer at Bower Retirement Services, said there are financial issues to deal with when moving house, with stamp duty alone costing 5 per cent on house prices above £250,000 which can make the decision to move uneconomical.

She said: “When you add that to the emotional wrench of moving home with the risk of losing touch with family and friends it can make downsizing seem a bad idea.”

The research also showed attitudes are shifting on leaving an inheritance, with 63 per cent of advisers saying their older clients are less worried about leaving money now, with the main reason being that children are financially well-off.

Equity release lending to homeowners over the age of 55 totalled £384.3m in the second quarter this year, the largest amount for any quarter since records began in 2002, according to the Equity Release Council.

However, house prices have also been continuing to rise this year, with many commentators complaining that not enough is being done to meet demand by building new homes.

peter.walker@ft.com