Six out of ten over 55s have not had their house valued since they first bought it 18 years ago, leaving them with far greater wealth than they realise, new research has revealed.
According to the Equity Release Council, the average UK homeowner aged over 55 paid £100,756 for their existing home, which 18 years later is now is worth £257,584.
This equates to an overall house price rise of 156%, giving them an extra £156,828 of equity even before mortgage repayments are taken into account.
However, this may be an underestimate. Office for National Statistics data shows the average UK house price has risen by 244% over the last 18 years, giving the over 55s property worth £346,861 on average.
The council said the tendency of people to misjudge their housing wealth may be linked to the low awareness of how price rises impact the property market where they live.
The research revealed that those over 55 think house prices in their region have increased by an average of 4.4% in the last year, compared to an actual rise of 6.1% (ONS).
Meanwhile, in the last decade, the over-55s estimate that house prices in their region have risen by an average of 21.8%, compared to an actual rise of 42.8% (ONS).
The council’s research suggests that eight out of ten homeowners 55 and over would consider using housing wealth to get the most from their retirement.
Almost a third feel the best solution is to use their pension savings before their property wealth; one in ten (10%) would prefer to use their savings and property wealth at the same time; and 9% would rely solely on property wealth or use it before their savings.
Among those thinking about using their housing wealth to help pay for retirement, downsizing is the main preference (42%), while almost one in four (22%) would prefer to stay in their current home and use a lifetime mortgage to release some equity. The remaining 36% are open to either option.
Nigel Waterson, chairman of the Equity Release Council, said: “At a time when savings are scarce and retirees face an uncertain financial future with the end of generous final salary pensions, these findings prove just how important it is that property wealth plays a role in financial planning for later life. They also show a large number of people are looking for help to decide how using their savings, equity release or downsizing can work best to meet their individual needs.
“It is vital the government acts on the Treasury Select Committee’s recommendation to include housing wealth within its pensions guidance service. It must also work with industry and regulators to improve access to advice, so people can consider all the options open to them in retirement and choose the one best suited to their circumstances.”
