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Equity Release

Downsizing is not an option for many homeowners

Christina Hoghton
Written By:
Christina Hoghton
Posted:
Updated:
17/12/2015

An equity release plan could be more financially viable and practical than downsizing for some older borrowers

Downsizing is not financially attractive for many older property owners, according to a new study from Key Retirement.

It reckons that the average equity release customer has lived in their home for 21.8 years before cashing in on their property wealth, and nearly one in three who release equity have lived in their homes for 30 years or more.

It added that 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.

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 that the costs add up: “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.”

Scarcity of suitable homes

In addition to costs, the difficulty of finding a suitable home to move to is cited by many customers as a reason for wanting to stay put and reinvest in their current property, future proofing their home to be suitable for them as they age.

Mirfin added: “Downsizing is logical and sensible and should work in theory for many but 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.”