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bigger textDownsizing dream in jeopardy for UK pensioners
Restrictive house prices and growing pensioner debt have combined to disrupt the downsizing dream, according to new figures from Homewise, Lifetime Lease provider to the over-60s. Unless they have the luxury of vast amounts of capital tied up in their homes, pensioners looking to raise funds to clear outstanding debts and enjoy their retirement by moving to a smaller home (i.e. downsizing) may need to consider alternatives.
Homewise has found that pensioners now need to free up £155,555 just to cover outstanding debts, typical move costs and the cost of living for five years. Even then they struggle to move to their preferred locations, as the choice of smaller properties to downsize to is limited, with two bedroom houses and bungalows both in short supply and therefore commanding a price premium.
Data from Homewise suggests the most popular retirement havens are East Sussex, West Sussex, Dorset, Devon, Norfolk and Hampshire. However, recent house price data reveals average property prices in these areas to be so high, that a smaller property can actually be more expensive than the larger one being left behind. As an example, someone looking to downsize to Devon from Birmingham will face a deficit of around £78,000 before even taking into account the other expenses associated with moving.
"Cashing in the family home and using the funds for an enjoyable retirement in a bungalow by the sea is what many of us aspire to, but the dream seems to be getting further away for many," comments Mark Neal, managing director, Homewise. "Our findings suggest that this dream is coming under increasing pressure, and in most cases it is now practically impossible to free up the kind of funds needed to enjoy a comfortable retirement to downsizing."
One alternative is to take out a Lifetime Lease on their next home, which enables people aged 60 or over to move into a property of their choice at a typical discount of 40% off the property's value. This is calculated by taking into consideration the buyer's age, gender and marital status. They can live in the property for the rest of their life, rent and mortgage free. This can allow people over 60 years of age to raise capital to clear outstanding debt and enjoy their retirement and, contrary to downsizing, can be done without forcing them to move to a smaller home which cannot accommodate a lifetime's accumulated possessions.
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