Purchasing a new property is one of the most common reasons for retirees to take out a home loan, with a growing number of over-55s upsizing, a new study has found.
According to OneFamily, people of this generation are now as likely to purchase a more expensive property as they are to downsize.
Indeed, the average lifetime mortgage for homeowners purchasing a new home is £117,000 – the largest of all loan values.
Traditionally, Lifetime mortgages were used by homeowners who wanted to stay in their current home and release equity to fund their retirement.
But OneFamily said it is increasingly being used for a broader range of factors. Buying a property, it revealed, had become the fourth most popular reason for taking out a lifetime mortgage as more and more retirees were relocating to be closer to family, friends and better amenities.
And this trend, it said, was driving a growing need for innovation in mortgage products for the over-55s age group.
Nici Audhlam-Gardiner, managing director of Lifetime Mortgages at OneFamily said: “Lifetime mortgages are helping our customers buy properties more suited to their retirement plans, be it living closer to family or friends or the need for a newer property that requires less maintenance.
“A lifetime mortgage can bridge the funding gap that many over-55-year olds have been excluded from by mainstream mortgages as they require affordability tests or are only available for homeowners of a certain age.”
She added: “Homeowners are increasingly using lifetime mortgages for a variety of reasons and this particular trend could be being driven by the more flexible mortgages now on offer.
“Alongside buying a new property, we have also seen an increase in homeowners using this product to gift money to family as a living inheritance.”
According to OneFamily a homeowner with a mortgage-free property worth £200,000 who wanted to buy a home worth £250,000 could take out a lifetime mortgage on the home they were moving to in order to make up the additional £50,000.
Homeowners can choose to pay the interest, meaning they protect the remaining capital on their home. Or they can pay nothing and the interest is taken when the loan is closed.
According to the NHBC Foundation half of over 55s are choosing to move and invest more money in the purchase of their new property, with a third upsizing to a new home with more bedrooms.
Many of those are choosing to move in with other family members as the rising cost of elderly care and childcare makes multigenerational living a more financially viable choice.
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