Bricks and Mortar In The Time Of COVID: Has The Pandemic affected People’s Attitudes To Property in Retirement?

Gareth Ware - Senior Comms & Editorial Executive

Published on 10th September 2020

According to recent figures released by the ONS, 43% of people surveyed aged from 16 onwards saw property as the likely leading income source to help them make the most of retirement (including 46% of 25-34 year olds), compared to 27% who thought a workplace pension would best finance their later years. However, many still believe they’ll downsize as opposed to borrowing against their property (close to a quarter vs 2%), although a number of pieces of research last year found that those in older age groups actually avoided downsizing when the time came due to sentimental bonds with their homes and a sub-par housing stock.

Rising property values could alter people’s views in the long-term when it comes to funding their retirement. A recent survey of 50+ homeowners found that on average respondents bought their home 20 years ago for an average of roughly £113,000, and their homes now have an average value of over £240,000, meaning they’ve more than doubled in value. For those in their 70s, the average house value increase rises to 153%, with a sample-wise average of over £127,000.

The pandemic has certainly resulted in a shift in attitudes towards housing wealth among those considering it, with research by OneFamily finding that 20% of those already exploring equity release as a funding avenue were now more likely to take it out. This could rise even further as a record number of over-65s are being forced into an earlier-than-planned retirement as employment among this demographic has reportedly fallen by 12% as a result of the pandemic.

Amid existing equity release customers, financial consolidation was a key focus, with 41% of funds released during H1 of 2020 – equating to well over £500m – ultimately being used to clear existing debts. However, there could yet be an increase in the amounts being released in order to help a family member in these troubled times – a survey from Hodge has shown that there’s been a 10% rise in the number of people who viewed giving financial gifts as a consideration for equity release since the pandemic has bitten.

That said, Nationwide’s recent restrictions on funding sources on its high-LTV first-time buyer mortgages (mandating that no more than 25% of the deposit comes from outside of the applicants own savings) may prove to be a future stumbling block, depending on whether the rest of the market follows suit. It’s also worth noting that according to research from Canada Life house deposits remain a minority use of funds among lifetime mortgages applicants at present, while a recent Mortgage Solutions poll has also highlighted that of those gifting for house deposits, 7% were using equity release to do so.

The picture surrounding retirement funds and property wealth – especially when intergenerational factors are considered – remains a fluid topic. House prices have risen over the past two decades and there is a growing number of people both prioritising property over pensions to fund retirement and who are more receptive to gifting to family members. On the flipside, equity release being used for first-time house purchases remains very much in the minority, and mortgage lenders are beginning to clamp down on the bank of mum and dad when it comes to high-LTV mortgages for first-time buyers. It’s a topic with many moving parts, and one well worth keeping an eye on as the full extent of the pandemic makes itself known in the coming months.

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