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Last-time buyers downsize to cash in equity

Robyn Hall

August 21, 2013

Four in every five retired homeowners who expect to sell are planning to buy another property. This is equivalent to around one million homes being bought and sold by pensioners many of whom will release substantial amounts of cash by downsizing.

Stan Russell, retirement expert at Prudential, said: “Housing wealth is potentially a significant source of additional retirement income for pensioners who own their own home. This is why so many of Britain’s pensioners are planning to become last-time-buyers.

“However it is dangerous for people to assume that housing wealth can make up for a lack of retirement planning.”

The majority, 73% of retirees, who plan to sell up and buy another property want to move into a smaller and less expensive home on average expecting to downsize to raise up to £62,000.

Nearly a quarter plan to use the money raised to boost their income in retirement, 13% will pay off debts and 8% say they’ll use the money to help with everyday living costs.

Prudential’s research also revealed that over one in five retired homeowners still have an outstanding mortgage with average monthly payments of £254.

The convenience of running a smaller home was the most commonly stated motivation for those who plan to downsize with a response of 48%, 22% claimed raising money was the main driver for their sale, while 11% wanted to reduce household bills.

Staying on the property ladder remains the overwhelming preference among retired homeowners. Just 6% of pensioners planning to sell their home intended to move into specialist retirement accommodation while only 4% expected to move into a rental property.

Russell added: “For some retired homeowners moving to a smaller home is a lifestyle choice but for a significant number the decision is a financial one. Our research also showed the financial nous of many pensioners. The majority of retired homeowners expected to sell their property plan to buy a smaller home rather than rent saving themselves on average £168 per month on the difference between average mortgage and rental costs.”


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