A landmark report from Senior Capital has revealed that amidst the cost-of-living crisis, almost one-in-five pensioners (18%) across the UK will find themselves on the poverty line due to not having enough money in their pension funds. This winter, the Department for Work and Pensions (DWP) is only committing a miserly £10 Christmas bonus to those claiming certain benefits, whilst research from Age UK has unveiled that in the cost-of-living crisis, 22% of British pensioners have already reduced or stopped spending on medications. This figure increases to 33% for pensioners when a household income is under £20,000, as 2.1 million pensioners live in winter poverty.
In light of these alarming findings and 24% of all pensioners having no savings at all, Rudy Khaitan, Managing Partner of Senior Capital, highlights how equity release mortgages are soaring in popularity as they allow pensioners to remain in their homes whilst also accessing their capital value to help fund their retirement. Paradoxically, due to the surge in house prices over the last 50 years, thousands of pensioners now find themselves in a situation of having a significant amount of capital wealth, but feel they are unable to access this in order to fund their retirement in the present. In the early 1970s, the average house price stood at a mere £4,975, but according to the latest figures released by the Office for National Statistics (ONS) in July, the average house price has skyrocketed to £290,000. Research from Savills has revealed that UK pensioners now hold a record £2.6 trillion in housing wealth, yet with Senior Capital’s study finding a staggering 13% of over 65s having to delay their retirement due to having insufficient funds in their pension pot, today’s generation of pensioners are the most financially vulnerable yet asset rich in recent history.
Senior Capital’s report has also revealed that one-in-seven pensioners now say that their biggest mental health strain is worrying about funding their retirement. By engaging in equity release, those who are currently struggling have the opportunity to tap into the significant value tied up in their homes, whilst also remaining in them and accessing much-needed funds to alleviate their financial strains amidst the ongoing cost of living challenges. The need for equity release is further highlighted during the winter period as new study from charity Independent Age, reveals that 24% of older people had to dip into their savings last winter due to insufficient income to cover living costs. This figure rises to 33% for households with an income below £20,000.
Managing Partner of Senior Capital, Rudy Khaitan, comments on releasing equity and the importance of LTV: “There is a growing need for new products that offer greater flexibility and choice, particularly in the relatively underserved later life lending market. For pensioners or anyone planning for their retirement, LTV is a critical component when assessing your quality of life during your later years, so it’s vital to investigate a multitude of options that can help ease your financial obligations, as remortgaging may not always be the right option.
"The right equity release mortgage product, particularly those that offer the greatest flexibility through limited prepayment penalties, can be the better option vs a more traditional mortgage when you want to unlock the value in your home without taking on additional monthly repayments. It allows homeowners to access the equity built up in their property, providing a tax-free lump sum to supplement regular income, whilst still retaining ownership and the right to live in their home for life or until they move into long-term care. This can be particularly advantageous for those who are retired or have limited income, as it offers financial flexibility and stability without the burden of servicing higher mortgage repayments."
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