As Later Life Lending Experts and Mortgage Advisers, we thought this was important!

Estimates from research conducted by Canada Life have suggested that an increasing amount of people will look to raise income by releasing equity from their homes and nearly 14 million plan to keep their current property rather than downsize.

With an increase of 5% since research conducted in 2016, over two-third of adults say they will remain in their current home when they retire, compared to just under a quarter who stated they would look to downsize.

Alice Watson, Head of Marketing and Communications at Canada Life Home Finance, said:

“The findings from this research are important given the current concerns surrounding how people will fund their retirement. Whilst average life expectancies continue to increase, people will need to spread their savings further in later life.”

An option that is growing in popularity is equity release, an option 6% of respondents stated they would do. Figures from the Equity Release Council show that amounts lent in the first two quarters of 2019 had more than doubled to £1.85 billion since 2016.

There are many reasons why people are becoming keener on ‘staying put’ in retirements, such as a need or desire to remain in an area, family reasons or the actual cost of moving.

On speaking to The Times, Marlon Lloyd Malcolm of estate agency Lurot Brand commented:

“Larger properties with higher price tags are harder hit on their value in down markets. You will take a large discount on what you are selling and a smaller discount on what you are buying. The net result is not favourable; throw in stamp duty and the whole process becomes a large loss of equity.”

With house prices having increased by more than 280% in the last 30 years it may not be surprising that retirees are looking to take advantage and release equity from their homes. One of the main reasons for equity release, found by Canada Life, was to make improvements to their properties for both comfort and accessibility. Clients may also want to have the opportunity of helping family when they need it, perhaps even helping them get on the property ladder, whilst letting them see and enjoy the benefits of their help and possibly saving on future inheritance tax.

Adam Sym, probate executive from Stephensons LLP stated:

“Due to the increases in property values over the last few decades, it is increasingly common for clients to find that their estates will attract an Inheritance Tax liability in the event of their death, even if they are not “cash-rich”. Naturally, most clients wish to pass as much onto their loved ones as they can by minimising the Inheritance Tax payable. In addition, many clients wish to pass on wealth in their lifetime, rather than simply on their death, as they can help their loved ones when they require it most and see the benefits it brings.
“In such cases, some clients may consider releasing equity from their home. This gives many clients the opportunity to make gifts to loved ones in their lifetime that they would have not otherwise been able to make. Outright cash gifts to a loved one are exempt from Inheritance Tax, provided that the client survives the gift by seven years. Lifetime gifts are just one of many inheritance tax planning opportunities that equity release can provide to clients whose families are facing an inheritance tax bill due to the value of their home.”

No matter what the reasons as to why people are deciding to stay in their homes when they retire, as Alice Watson continues that it is

“important that the industry makes clear that equity release is a way for people to retain ownership of their property, age in place and boost their retirement income.”