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Number of last-time buyers doubles as life-expectancy rises

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Written by: Max Liu
09/04/2019
One in three home movers are last-time buyers, as older homeowners choose to downsize
Number of last-time buyers doubles as life-expectancy rises

Nearly 200,000 owner occupier housing transactions in England are now made by the over-55s as a growing number use their equity reserves to find their perfect last home, according to the Intermediary Mortgage Lenders Association (IMLA).

One in three home movers are last-time buyers, according to the IMLA’s report – ‘Last-Time Buyers: the challenges and opportunities for 55+ homeowners wanting to move’ – which found that between 2010 and 2017 older homeowners were predominantly using cash to buy new homes.

The report notes that each year only around 2.5% of the eight million older homeowners in England move. But it predicts that, as the cohort of over-55s swell faster than all other generations over the coming decades, more people will seek to make one final housing transaction.

Cash buying under the radar

HMRC and the Office for National Statistics have estimated that property transactions are running at only about three-quarters of the pace before the credit crisis. According to the IMLA: “The picture would have been a lot bleaker had it not been for much higher activity from LTBs.” The number of last-time buyers, they found, has roughly doubled over the past decade.

Sixty-three per cent of older homeowners (55+) own their property outright, and they account for the bulk (84%) of all outright owners, holding a disproportionate share of housing equity – £1.8 trillion out of a total £2.6 trillion. Much of this equity is likely fuelling LTBs – in 2016/2017 LTBs in England accounted for nearly all of the moves (132,000) by outright owners (138,000), which were up 20% overall since 2006/2007 (115,000).

This indicates that most LTB activity, and much of the growth in that activity, was cash-financed, a phenomenon which has remained relatively hidden as market analysis tended to focus only on mortgage transactions.

LTBs lack options

LTBs currently account for a small percentage of the 55+ home-owning population but the IMLA found that 47 per cent of older homeowners – about four million households – plan to downsize at some stage if they can find the right property.

According to the report, an array of factors hold back LTB activity – including poor choice of suitable properties, high transaction costs and affordability pressures. Relatively few older homeowners need to move for health or other personal reasons, and for the vast majority any move is aspirational in nature and focused on the mainstream housing market.

Increased life-expectancy driving demand

Kate Davies, executive director of IMLA said: “Our increased life expectancy and growing number of people aged 55+ means that, far from being a niche sector, the number of LTBs in England has doubled within a decade. It’s clear that there is much appetite among older homeowners to move into a property better geared to their needs in later life.

“It is curious that house-builders appear to have been slow to recognize what could be a sizeable market for a variety of designs that combine practicality, low maintenance and energy efficiency. Retirement developments aimed at senior citizens have their place, but they’re not appropriate for everyone.

“We have already seen considerable financial innovation around mortgages into retirement, lifetime mortgages and retirement interest-only products. But there is much more that could be done in fostering LTB schemes, whether these are bespoke equity loan deals, shared ownership schemes or entirely new arrangements.

“It may also be time for the Government to address this LTB policy blind spot and begin to work more closely with the lending and house-building sectors to kick-start activity, much as it did for first-time buyers with its Help to Buy initiatives.

“We see huge opportunities for the housing and mortgage sectors to better serve the interests of older homeowners over the coming years, and in ways that promote their lifestyle and well-being, as well as the wider health of the housing market.”

Davies’ comments chimed with research from Responsible Life which recently showed a shortage of smaller properties was stopping retirees from downsizing. Across the UK, there were more four bedroom properties than two beds available in nearly 67 per cent of areas, a problem which could prevent retirees moving when they wish to downsize and free up cash for living costs and other family members.

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