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Homeowners underestimate property wealth by £90K

Homeowners underestimate property wealth by £90K

Category: Retirement

Updated: 04/12/2015
First Published: 04/12/2015

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Do you know how much your home is actually worth? If you haven't had it valued in a few years, you may be surprised, as you could actually be sitting on far more property wealth than you realise…

Over-55s living in a goldmine

According to research from the Equity Release Council, 60% of homeowners aged 55+ haven't had their house valued since they bought it (an average of almost 18 years ago), and they're dramatically underestimating their property wealth as a result.

The figures show that the average UK homeowner aged 55+ paid £100,756 for their existing home, which they now estimate to be worth £257,584 after having lived there for an average of 17 years and 10 months. This equates to an overall house price rise of 156%, leaving them with an extra £156,828 of equity, which in itself is more than six times the average DC pension pot at retirement (£25,000), and almost three times the average amount used to buy an annuity (£55,750)!

However, they could be seriously underestimating even these figures, with data from the Office for National Statistics (ONS) showing that the average property has actually increased in value by 244% over the last 17 years and 10 months. This would mean a home formerly worth £100,756 would now be valued at £346,861 – almost £90,000 more than homeowners themselves estimate!

Put that extra equity to good use

Just think of what all that extra cash could be used for. It could comfortably cover things like home improvements and could easily pay off debts, and given that it far outweighs the typical pension, it could even be used to help fund your retirement, be it through downsizing or equity release.

It seems that a growing number of people are open to this kind of idea, too. The research found that 80% of homeowners aged 55+ would consider using their housing wealth to get the most from their retirement, while 9% intend to rely solely on their property wealth (or use it before their savings), and a further 38% think that unlocking money from the value of their home is likely to benefit them financially in later life.

Downsizing is still the preference among those who would consider using their housing wealth to help pay for retirement (42%), but almost one in four (22%) would prefer to stay in their current home and use a lifetime mortgage to release some equity. The remaining 36% are open to either option based on their circumstances.

Nigel Waterson, chairman of the Equity Release Council, commented on the findings: "It is no secret that the property market has been kind to many homeowners, but it is remarkable to see how far people underestimate the potential size of their housing wealth, which puts the average pension pot in the shade.

"At a time when savings are scarce and retirees face an uncertain financial future with the end of generous final salary pensions, these findings prove just how important it is that property wealth plays a role in financial planning for later life. They also show a large number of people are looking for help to decide how using their savings, equity release or downsizing can work best to meet their individual needs."

What next?

Thinking of putting your property wealth to good use? Consult our no obligation equity release service to find out more and see if it could be an option.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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