Record house price increases over the last 5 years are driving an increasing number of homeowners to use the value of their home to fund their retirement.
According to research by Legal & General Home Finance, 35% of all people who aren’t currently retired own a property but have less than £10,000 saved in their pension pot. A further 22% of people hold no pensions savings at all. The significant number of small or empty pots, coupled with the 24% increase in median house price values in England and Wales since 2016, could be driving more people to consider using their property wealth to fund their retirement.
Based on current house prices in England and Wales, the average homeowner could access over £72,988 in equity release, for instance. People who aren’t currently retired expect to downsize their property (10%), sell their property (9%) or access equity via a lifetime mortgage (6%) to help fund their later life.
While many people looking ahead to retirement are hoping to access property wealth there are a significant number of retired homeowners who could also benefit from considering the role their property might play in funding their lifestyle. 70% of people over 65 are dependent on the state pension as their main source of income and are also homeowners.
Claire Singleton, CEO, Legal & General Home Finance, said: “The significant increase in house prices in recent years has likely shifted many people’s expectations of the role property wealth will eventually play in supporting their retirement. We anticipate that using your home to fund your retirement will become more commonplace in the future, whether that’s by downsizing to free up funds or releasing money tied up in your home through products like lifetime mortgages. It's never too early to start thinking about how you plan to fund retirement and to seek the appropriate advice to get your affairs in order, and for many homeowners, their property could be the key to getting the lifestyle they desire.
“Our findings also show there are a large number of people currently in retirement who may be on a limited income and could benefit from the likely increases in the value of their home. It’s important we challenge the discomfort some people still have with using cash from their home to help them achieve better financial outcomes in retirement.”