More over-55s now want to stay in their homes rather than downsizing in their old age, after the pandemic led them to place a higher value on space and staying within a supportive community.
The number of homeowners over 55 who were looking to downsize in the near future dropped by 200,000 in the last three years, according to research by Legal & General Financial Advice.
The latest study found that potential downsizers made up 24 per cent of all households aged 55 and over, amounting to 2.9million homes.
Staying put: Fewer older people are thinking about downsizing – even though they believe they could gain an average of £150,000 in cash if they did so
When Legal & General last analysed the market, in 2018, this figure stood at 26 per cent of households, meaning there were then 3.1 million potential houses to be sold.
When asked why their plans had changed, the main reason was that they did not want to leave the community they lived in.
Many said the Covid-19 pandemic had emphasised the importance of having friends and family close by.
Sara McLeish, chief executive of Legal & General Financial Advice, said: ‘The impact of Covid-19 has clearly changed the mindset of many older homeowners, and we can see there has been an uplift in those who want to keep hold of their home.
‘Over time, priorities can change, and it is only natural that over the course of the 16 months people have grown closer to their local community, valued having family nearby and enjoyed having the space to relax while in lockdown.’
The lockdown resulted in us spending more time in our homes than ever before, which also influenced the decision not to downsize.
Almost 3 million would still consider selling their home and moving in to a smaller property
One in four (24 per cent) said they enjoyed having more space during lockdown and did not want to give that up, while a further one in ten (13 per cent) said they had decided to invest in their current home rather than moving on.
However, Legal & General said there were still 2.9million older households who may sell their home in their golden years.
Nearly a quarter of over 55’s who had not sold their home stated that they would still consider downsizing, but wanted to see how their financial situation developed before deciding (12 per cent) or felt uncertain about the current housing market (10 per cent).
‘Our research suggests many over 55s are still open to the idea of moving, but are mulling things over before making any decisions, so we may see a shift in stance now that lockdown has eased,’ McLeish added.
Downsizers expect £150,000 windfall
Those that do choose to downsize could be in for a cash windfall of £150,000, according to a separate study.
The survey commissioned by Churchill Retirement Living, which polled 2,009 people aged 60 and over, found that one in ten believed they could release between £250,000 and £500,000 in equity if they moved to a smaller property.
On average, people said they would expect a windfall of £150,000. That increased to an average of £295,000 for properties in London.
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Perkins says downsizing to a retirement village gave him a ‘fresh start’
Barry Perkins, 89, recently downsized to move to an apartment in a Churchill retirement village in Newquay, four years after his wife passed away. He said:
‘I was in a difficult spot after my wife died. Now that I’ve moved, I’m beginning to accept the loss. Although nothing can replace her, I feel like I’ve had a fresh start, even at this age. I now see my future years in a much more positive light.
‘I have moved seven or eight times in my life, and have met all sort of different people, and I’ve never met a better group of people. There’s always something going on to keep you busy.
‘Now that restrictions have been removed, people will continue to feel isolated. Retirement living could be a really good step for them. It certainly was for me.’
Many older people admitted to being in homes too large to suit their daily needs. More than a third (36 per cent) who lived alone reported having at least two spare bedrooms, while two-thirds (65 per cent) of those living in a couple had at least one spare bedroom.
Three in 10 said they had a room they used solely for storage.
Older people downsizing is important to a healthy housing market, as it frees up larger homes for young families.
If there are few larger homes available this can have the effect of driving up prices, making it harder for families to find the space they need.
When asked how they would use the potential proceeds from downsizing, a significant proportion said they would use it to top up their pension (28 per cent) or put it towards the inheritance for their family (41 per cent).
Nearly 1 in 3 (29 per cent) said they would put the money towards a family holiday or a trip, while 7 per cent would simply put it towards their social life.
Chief executive and chairman of Churchill Retirement Living, Spencer McCarthy said: ‘These latest findings are a clear signal that not only are there better options for quality of life out there, but huge opportunities for people to spend more time on the things they enjoy like family, holidays, or helping others’.
However, there are also compelling reasons for many homeowners not to downsize.
For those who remained hesitant the main barriers are that they loved their current location too much (45 per cent) and that they were not sure they would find somewhere suitable (33 per cent).
Meanwhile, more than one in four (27 per cent) said they were too attached to the property for sentimental reasons.
Should I consider equity release?
One way to access the cash tied up in a home without downsizing is to take out a lifetime mortgage, also known as equity release.
This is when a lender will advance some of the cash tied up in a home to an owner over 55, provided they have paid off their mortgage.
The balance will then be repaid, with interest, after the owner passes away or moves in to long-term care.
‘For those who don’t want to move, unlocking some of the equity tied up in their housing could therefore prove a huge help, particularly when the time comes to make a home fit for older age,’ said McLeish.
‘While this may be a lifeline for some, for anyone thinking about this route, it’s important to consider all of your options and seek proper advice before doing so.’
Is equity release for me?
According to equity release provider Key, 557,000 Britons have used equity release in the past 20 years, releasing more than £32billion of cash.
Equity release is a type of mortgage which effectively advances part of the value of a property to a homeowner over the age of 55, while they are still living in it.
The balance, plus interest, is then paid off by the sale of the house when the owner dies or moves into care.
Downsizing is another option older homeowners may wish to consider
Historically, equity release had a controversial reputation. This was partly because in the early days there was no option to make repayments until after the borrower had died, meaning interest mounted up.
But the sector has exploded in the last couple of years as rates have come down and borrowers have been given the option of paying interest as they go, as well as taking ‘drawdown’ options which allow them to withdraw money gradually and only pay interest on the sum they have taken out.
While the options in the sector have improved, some experts argue that equity release should still be a last resort for funding retirement.
One concern is the fees charged by equity release lenders for paperwork when borrowers want to make changes to their plans.
For example, an investigation by This is Money’s sister title, Money Mail found that one major lender charged £600 in admin costs.
The cost is also compounded because equity release decisions can only be made after talking to an independent adviser — which can add thousands of pounds to the bill.
In addition, taking wealth out from a property means less of an inheritance is left for the owner’s family – though they could choose to gift some of the proceeds from their equity release to them they while they are still alive.
Alternatives to equity release include a regular remortgage and a retirement interest-only mortgage.
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