Over 2m homeowners bank on property equity

Nia Williams

May 21, 2014

Prudential’s research found that 38% of over-55 homeowners expect to sell their houses at some point, with one in five (20%) expecting to sell and buy another property within the next five years.

More than three quarters (77%) of the over-55 homeowners who are planning to sell say that they aim to release equity from their home by downsizing.

The average amount they hope to release is around £85,300. However nearly one in ten (9%) are expecting to raise £200,000 or more.

The most common reason cited for downsizing by this group is the convenience and the ease of running a smaller home (60%). A third (32%) said the reason for downsizing is to raise money; 29% are planning to put some of the money into their pension pots.

However, the research highlighted that the costs involved with moving house are a significant barrier to downsizing – more than a quarter (28%) of over-55 homeowners say they are likely to be deterred from downsizing by the total bill for buying, selling and moving home.

Vince Smith-Hughes, retirement income expert at Prudential, said: “Homeowners who have been lucky enough to gain from the long-term strength of the housing market should exercise caution if they are banking on downsizing to be the magic wand that provides a decent retirement income. In some cases the amounts of cash realised can be lower than expected and the cost of moving house should not be underestimated.

“The changes to pensions and how people can take their retirement income announced in the Budget in March will provide savers and retirees with increased choice. Our research also shows that homeowners are thinking carefully about what to do with the even greater degree of choice provided by expected gains from the value of their home.

“Faced with all these potential decisions, people approaching retirement should seriously consider taking professional financial advice.”

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