Worries about a shortage of homes suitable for retirement, fees and high property prices are the major reasons deterring some older homeowners from downsizing, a new study has found.
According to Prudential, a lack of suitable available housing is the main reason over-55s believe downsizing is not more popular – nearly four in 10 (38%) blame the lack of suitable houses.
Meanwhile, 24% blamed the cost of moving in terms of stamp duty, solicitors and estate agents, and 17% say high house prices put people off.
Many pensioners who want to move and downsize into a more suitable property are unable to because the costs of stamp duty are prohibitive and there is a lack of suitable housing.
Encouraging older people to move into smaller properties has been suggested as a way to free up homes for younger buyers looking to move up the housing ladder.
One possible solution is to offer incentives, such as a reduction in stamp duty.
The research also revealed that one in seven people fear they won’t be able to retire unless they downsize.
Nearly half (47%) of over-55 homeowners are planning to sell and move to cheaper homes in later life.
On average they expect to raise around £112,000 in equity by downsizing with around one in 10 (11%) expecting to make more than £200,000. In fact, more than one in seven (13%) said they could not afford to retire unless they downsized.
The study of over 1,000 homeowners aged over-50 found nearly three-quarters (74%) rated convenience as their main reason for downsizing compared with just 28% who said they were doing so to mainly to release cash for retirement. Meanwhile, just over one in three (34%) said having a smaller garden was a major motivation.
Of those who expect to raise money from downsizing 60% will use it to boost their retirement funds and improve their standard of living. Nearly half (47%) will use the cash for travelling more, while (13%) want to release equity to help their children buy a house and 14% will simply give the cash to their children.
Vince Smith-Hughes, a retirement income expert at Prudential, said: “It is interesting to see that these figures challenge the common theory that ‘my house is my pension’. Although we see a large proportion of those taking equity from their homes to boost their retirement incomes, most people have accepted that the main reason they need to move home in later life is for convenience.
“With the average amount of equity raised likely to be just over £100,000, and with many other demands on this cash – such as helping children, paying off debts and putting money aside to pay for care in the future – it is clear that for most people the best way to fund retirement is through saving as much into a pension as early as possible in their working lives.
“The results also show that many people are worried about that the costs involved in moving house may eat into the equity they’ll be able to take from their home. Most people who are considering making major financial decisions, such as selling their home, in the run up to retirement should benefit from a consultation with a professional financial adviser and the free guidance on their pension options available from the Government’s Pension Wise service.”
[box style=”4″]
What Mortgage has teamed up with London & Country to offer you expert advice on the right mortgage deal.
Whether you’re buying a new home, remortgaging to a new deal or buying an investment property, L&C can help – and you’ll pay no fee for their advice. To find out more, click here.
[/box]
