Those aged 55 and over who own their own homes may currently be sitting in a goldmine, according to Age Partnership, and with house prices likely to continue rising, it could mean that this age group will have access to a significant amount of equity when they enter retirement.
Age Partnership calculates that over-55s in England are presently in possession of £1.2 trillion worth of property, a figure that is estimated to increase to almost £2.5 trillion by 2035 if house prices rise at a modest 2% per annum.
This means that this age group is sitting in a favourable position: not only are their homes going to continue to increase in value, but they are also likely to benefit from greater longevity, giving them even more time to accumulate greater housing wealth.
As a result, those heading towards retirement could have access to a significant amount of equity with which to support their retirement. "We are witnessing a radical long-term shift towards people reaching retirement age with a hugely significant nest egg in the form of property wealth," said Simon Chalk of Age Partnership. "As the number of people retiring with generous defined benefit pensions declines, housing wealth could become even more important in retirement planning in twenty years' time than it is today."
Equity can be released from a home in two ways: the owner could downsize and thereby free up some money from the sale of their old family home, or they could turn to equity release, which removes the need to uproot and move house. Equity release frees up money from your home through a lifetime mortgage or a home reversion (find out more by reading our equity release guides). As we live longer, and the costs of funding retirement subsequently rise, turning to the home, which is many people's largest asset, may become more common.
Turning to equity release to supplement a pension or fund major purchases during retirement may be an option if you haven't managed to save as much as you needed to for your retirement. However, it may not be for everyone: it can affect what you can pass onto your family upon your death and it may be difficult to downsize at a later date, among other things.
If you'd like to look into equity release, make sure you seek independent financial advice first. Equity release can be a complex arrangement, so it is important you understand all the ins and outs. You can also contact our no-obligation equity release service to find out if it could be a retirement solution for you.
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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