High financial and emotional costs of selling the family home to move into a smaller dwelling are set to encourage increasing numbers of retirees to look towards alternative options such as equity release, according to Just Retirement.
The retirement specialist recently unveiled a major study into consumer attitudes towards housing equity withdrawal that found considerable resistance to the idea of downsizing among the 1,000 homeowners aged over 55 who took part.
"The traditional view is that downsizing is a way older people can free up some capital and cut their living costs," said Stephen Lowe, group director of external affairs and customer insight at Just Retirement. "It is only when you question those people thinking about going through with it that you get a sense of how reluctant they really are.
"What seems an easy financial decision from a practical point of view is often a huge emotional wrench that people seem keen to avoid."
The report The role of housing equity in retirement planning found that the majority of homeowners were against moving from the family home. 55 per cent had lived in their homes for more than 25 years and a further 24 per cent had bought between 16 and 25 years ago.
"As people age, they appear to get more reluctant to sell up and move to a smaller home," said Stephen Lowe. "Of those with between five and one year to retirement, about half said they would rather sell up than use equity release, but this number fell to just over a third of those actually in retirement."
The study carried out extensive face-to-face interviews with homeowners to gather views on a variety of topics including downsizing, inheritance, retirement income and paying for long-term care. Reasons to avoid downsizing ranged from the emotional to the practical and financial:
No wish to leave cherished home close to friends or family
The need for extra space to accommodate possessions and visiting family
High selling, repurchasing and moving costs eating into any value released
The hassle of home-hunting and difficulty of finding somewhere suitable
Lower future house price gains from a smaller home
"There was a widespread feeling that downsizing was a major upheaval and probably worked best if people did it relatively early in retirement or in response to poor health," said Stephen Lowe. "But interestingly, a few had downsized and been disappointed by the results after the costs were taken into account.
"People were also very aware that there are a lot of retirees have the same idea and there is a very restricted supply of the right kind of homes in the right areas. This is not just a consequence of the current slow market. As the demographic bulge of the baby boom generation enter retirement, it is difficult to see how this lack of suitable homes is going to be improved.
Just Retirement sponsored the research in order to give policymakers an insight into the thinking of real retirees who need to make intelligent decisions about how to deploy their assets during retirement. It revealed that many face an income squeeze in retirement with one-third relying on state pension, and a similar number predicting they will be financially comfortable in 10 years' time.
"A home is usually someone's biggest asset and it does make sense to use some of the value tied up in it to underpin a more acceptable retirement," said Stephen Lowe. "Equity release offers a quick way for those who can't or don't want to move to generate a lump sum or income. This is wealth they have accumulated over the long-term and they are naturally keen to want to choose how best to use it."
For more information on the research go to www.ERresearchcentre.org
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