Almost 2 in 5 homeowners over 55 plan to raise money by downsizing

The Momentum UK Team 29 May 2014

Up to 2.5 million homeowners aged 55 or over are planning to downsize and sell their home to raise cash, according to new research.

On average, those planning to downsize expect to raise £85,000 from the move. 38% of over 55s who own a home expected to sell their houses at some point, with 20% expecting to buy and sell in the next five years. 77% of homeowners aged over 55 who are planning to sell said they wanted to release equity by downsizing, with £85,000 being the average amount they hoped to release. However, 9% expected to free up £200,000 or more.

When it comes to using the money they hope to release, 42% wanted to make a big purchase and 41% wanted to invest or save it. 29% are planning to put some of the money into their pension pots.

60% of those questioned said they were downsizing due to the convenience and ease of running a smaller home, 32% said they wanted to raise money, and 21% wanted to save money on the cost of running their home. However, the cost of moving was also an obstacle to downsizing, with 28% of those surveyed saying that they are likely to be deterred by the price of buying, selling and moving home.

12% of surveyed over-55s said that they would be using the released equity to help their offspring get onto the property ladder, and 15% said they plan to help their children financially in other ways.

Vince Smith-Hughes, retirement income expert at Prudential, commented:

“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.

“Irrespective of the Budget changes and the strength of the housing market, the fundamental principle remains true – the best way to secure your desired level of retirement income is to save as much as possible as early as possible in your working life.”