The slump in the property market as a result of Brexit could potentially increase demand for homeowners looking to release equity from their homes, according to OneFamily.
With Brexit causing a downturn in property prices, OneFamily expects this to drive applications for lifetime mortgages with homeowners looking to access cash at a time when downsizing is not a cost-effective or viable option in a slow housing market.
Retirees are increasingly spending on average £8,000 more per year than they planned for, a figure which is expected to grow over time, research by OneFamily shows.
It found those aged 55 and over are sepnding £23,773 per year in retirement, even though the average income of a retired household is just £15,800.
OneFamily said that homeowners can access on average £77,000 through equity release – 3.5 times the median gross annual pay of £22,000 and enough to plug the gap between income and outgoings for almost a decade.
Lifetime mortgages are a form of equity release that allow homeowners to unlock valuable money at a difficult time while maintaining ownership of the property, so they can still benefit when prices start to rise again.
Simon Markey, CEO of OneFamily, said: “It’s clear that lifetime mortgages will play an increasingly important role for home-owning retirees, as their planned expenditure continues to rise above expected income.
“Two-thirds of those aged 65 and over own their home outright, and so releasing some of the value wrapped up in their property through a lifetime mortgage is one way this asset-rich, cash-poor group can make their retirement more comfortable.”
For the younger generations, the research identified unrealistically high expectations of their income in retirement. Life expectancy has also increased more quickly than retirement age, putting an increasing number of people at risk of under-saving for retirement.
In the future, retirees will spend an increasing share of their income on housing, while the aggregate deficit of pension schemes is widening, putting more employees at risk of receiving a reduced pension pay-out.
The research also found that parents and grandparents still expect to be fulfilling the role of Bank of Mum and Dad into their retirement, with almost two-thirds (64%) planning on providing financial support to other family members.
Contributing towards events like weddings and christenings (24%), helping to buy property (21%) and paying towards university tuition fees (20%) are the three main ways the Bank of Mum and Dad will be called upon.
While the majority of people expect to support family members in the future, more than a third (35%) do not have a plan in place at present, while 12% answered they did not intend to make any plans at all.
Find out how much you could potentially release from your property by using Equity Release Supermarket’s online equity release calculator, which you can find here.
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