The average equity release customer has lived in their home for 21.8 years before cashing in on their property wealth, new analysis from over-55s retirement specialist Key Retirement shows, with pensioners in London owning their homes for nearly 26 years before accessing the wealth.
The analysis reveals that nearly one in three who release equity have lived in their homes for 30 years or more. Key believes this illustrates why, for many, downsizing is simply not an option.
Homeowners who bought in early 1993 have seen average UK prices rise from £60,850 to around £203,800 – a rise of nearly £143,000 – while Londoners buying in 1989 will have seen average prices rocket from £96,130 to around £408,000 giving them gains of around £312,000.
Retired homeowners trying to downsize to release wealth typically face stamp duty of 2% on the proportion of a home’s value over £125,000, rising to 5% for the proportion over £250,000.
Dean Mirfin, technical director at Key Retirement, said: “Stamp duty, legal and removal fees and the cost of turning their next house into a home make downsizing an expensive option for many. The upheaval and risks of losing touch with friends and family as well as local services, including healthcare, can all impact negatively on the decision to move, as well as the fact that these homeowners are very attached to their homes, which they have invested in for many years.”
Cost and other issues aside, the difficulty of finding a suitable home to move to is cited by many customers as a key driver in them wanting to stay put and reinvest in their current property, many choosing to future proof their home to be suitable for them as they age.
Market analysis shows the number of homes for sale has slumped to a record low in November adding to the struggle for older homeowners to find a suitable home to move to, Key warns.
Mirfin added: “Downsizing is logical and sensible and should work in theory for many but turning the theory into practice is tougher than it seems and the theory overlooks a wide range of issues that are important to retired homeowners.
“Equity release customers are accessing an average of nearly £75,000 from their property wealth without having to tackle the financial and emotional issues involved in moving home.
“The average customer has owned their home for nearly 22 years and has clearly benefited from house price growth but prefers to stay in their house rather than going through the upheaval and costs of moving. Until we are building the right sort of properties and in the right quantities both the math and availability to facilitate downsizing remain a huge challenge.”