3-in-5 homeowners expect property wealth to fund retirement

Over 60% of homeowners see property wealth as a potential income source

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The Equity Release Council has found that more than three in five (61%) UK homeowners now plan to use their property wealth to meet their financial needs in retirement. 

The figure is up from 2021 when 57% of people said they planned to use property wealth in retirement. It equates to around 18.7 million people expressing an intention to free up some of their equity in the future.

According to the survey of 5,000 adults, almost half (46%) of homeowners aged 55+ see their property wealth as a means of boosting their later life finances. But the figures are highest among the younger cohorts. 

Three in four (75%) homeowners under the age of 55 are said to be open to utilising their growing property wealth in later life, whilst 78% of people aged 35-44 feel the same.

The rise of property wealth as a retirement strategy

With the cost of living soaring in recent years, it’s understandable that more UK homeowners are looking to their property wealth to enhance their retirement finances. Despite recent market fluctuations, properties across the UK have been soaring in value over the last decade.

It means homeowners are now sitting on considerable assets that can be utilised to provide a more comfortable retirement. This phenomenon is particularly evident in cities like Manchester, Bristol and Belfast, where property values have soared over the last ten years.

The table below shows how average property prices have risen across the UK in the last decade.

Source: Land Registry data for March 2014 vs March 2024

As the table above demonstrates, even in Newcastle where the average house price has risen by a modest 35%, the average home still has £50,000 more equity than it did ten years ago. That’s a significant boost to a person’s retirement income should they wish to access some of their property wealth.

Why are so many homeowners relying on their property wealth?

There are several reasons why more UK homeowners might expect to one day rely upon their growing property wealth to boost their retirement finances.

Inadequate pension savings, for one. Those who have not saved enough through traditional pension schemes during their career may need to find alternative ways to fund their retirement. This is especially the case for individuals wishing to achieve a comfortable retirement rather than the minimum standard of living that a full State Pension provides. If a person has substantial equity in their property value, it may offer a viable cash boost.

Of course, not everybody has a pension scheme, so some rely upon their personal savings and ISA accounts to top up their State Pension income. But with inflation being as high as it has been, there will be many who have been unable to save as much in recent years as they had perhaps intended. Unless those savers can make up their shortfall before retirement, it could have a significant impact on their future retirement income. 

The higher cost of living has undoubtedly put extra pressure on the already tight budgets of many people. For homeowners struggling to make ends meet each month, their growing property wealth could provide a substantial financial cushion. 

How can homeowners access their growing property wealth?

Equity in a home can be accessed through various means, such as downsizing, equity release, remortgaging or arranging a retirement interest-only mortgage. With several options available to unlock your appreciating wealth, you can tailor your strategy to your personal needs and circumstances.

Downsizing is the obvious first consideration for many homeowners looking to access some of their property wealth. Moving to a smaller home or a less expensive area allows you to free up a cash lump sum, and if you don’t have a mortgage, still have 100% of your home’s value available for the future.

But for homeowners aged 55+ who do not wish to sell up or move from the home they love, equity release is a popular option. This option allows you to take out a loan against the value of your home, in exchange for a single tax-free lump sum, or several tax-free payments as and when needed. 

The loan plus interest is typically repaid when the home is sold after the last surviving homeowner passes away or moves into long-term care. However, there are also interest-payment plans available to prevent the loan from growing in size, together with voluntary payment options to reduce the overall size of your loan.

Equity release has come a long way in recent years, with lenders introducing many safeguards and guarantees to protect consumers. For instance, the no-negative equity guarantee ensures you will never owe more than the value of your home, regardless of how much interest accrues on your loan.

There are drawbacks to consider though. For instance, a plan will reduce the value of your estate and the amount of inheritance you leave. It is essential you carefully consider all of your options first, seek professional advice and weigh the potential risks and benefits.

If equity release isn’t right for you then there are other options to consider in retirement which could help you to boost your later life finances. You can read more about the alternatives to equity release here.

Find out more about equity release

For specialist guidance on equity release, homeowners aged 55+ can get in touch with our selected advisers by calling our friendly team.

Please call 0800 096 2215, or request a call back for a time that suits you. Alternatively, you can use our free equity release calculator to see how much you could unlock.

Sources:

More than three in five UK homeowners plan to use property wealth in retirement: No brick left unturned: three in five UK homeowners look to property wealth to prop up retirement dream, Equity release Council. Accessed 29 May 2024.

House price data for 2014 vs 2024: UK House Price Index, Land Registry. Accessed 29 May 2024.

About Clare Yates. With over a decade’s experience writing about later life financial planning, Clare offers a wealth of knowledge about equity release, pension annuities, wills, LPAs and more. When she isn’t writing, Clare likes to spend her time baking and going on walks with her husband, two children and their rescue dog. Follow Clare on LinkedIn