Older homeowners are expecting an £18,000 shortfall for their retirement income with equity release offering untapped potential.
In retirement homeowners are expecting to need an income of £35,196 while the income for single retirees is £17,212 per year leaving an average shortfall of £17,984 according to a survey from the Equity Release Council.
For the equity release buyer there is untapped potential in their property equal to 12 years of State pension payments which they could release using a lifetime mortgage, with loan to values based on age.
See the exclusive deal from providers by taking cash from your home or repaying a mortgage at this link:
Equity release quote with the latest products and rates from the providers.
The generous final salary schemes are expected to be obsolete by 2050 replaced by workplace pensions requiring people to buy income with an annuity as rates are falling, increasing pressure on older homeowners.
Government figures show retirees are more reliant on the State pension contributing 43% of a pensioner’s household income increasing to 59% for a single pensioner.
Homeowners not saving enough
The high costs of living experienced by first time buyers and home movers during their working lives makes it harder to save for retirement with 44% saying paying the mortgage limited pension savings.
Of those that have been able to increase their pension savings 31% said it was only possible because they no longer had a mortgage.
This survey from the Equity Release Council shows the shortfall in expectation of retirement income and actual income received.
| Region | Shortfall |
|---|---|
| Yorkshire & Humber | £27,723 |
| London | £19,856 |
| South West | £19,531 |
| North East | £18,772 |
| Wales | £16,907 |
| Scotland | £17,652 |
| East England | £17,366 |
| South East | £15,935 |
| East Midlands | £15,781 |
| North West | £15,716 |
| West Midlands | £12,617 |
| Northern Ireland | £10,253 |
Yorkshire & Humber has the greatest gap between expected and actual income at retirement of £27,723 followed by London with £19,856 and the South Wes at £19,531.
For those with a shortfall in expectation and considering equity release as a solution should talk to your family about the options to access cash and impact this could have on their inheritance.
In the survey of homeowners aged 55+ were asked why they were unable to increase their pension savings with 30% citing higher living costs and 24% prioritised repaying the mortgage.
There were 24% saying their earnings were not enough to save for a pension, 22% still had dependents at home with 22% saying they were not retiring soon and 29% believed they had enough savings.
Remortgage buyers currently on your lenders standard variable rate should switch to a new low cost mortgage deal reducing the cost of monthly repayments and using the savings to add to your pension fund.
Property offers untapped potential
The wealth in property is in excess of £4 trillion and for homeowners aged 55+ accessing cash using equity release usually draw 30% of its value, equivalent to £88,290 based on average house prices.
Increased competition from providers has made lifetime mortgages more flexible with the option of repaying the mortgage early, make penalty fee overpayments, downsize in the future or leave an inheritance.
Costs have decreased considerably with fixed rates of 6.3% in June 2014 reducing to 2.80% in March 2020 and similar to a competitive 10-year residential mortgage.
A lifetime mortgage lets you stay in your own home, does not require monthly repayments using the cash for a specific reason or any purpose such as repay an interest only mortgage home improvements or buying a new car.
Equity release is possible for buy-to-let landlords in retirement using a lifetime mortgage for their property portfolio to generate more income as there are no repayments to make to the provider.
As long as homeowners’ expectation of retirement income remains above actual income, they can view property wealth as the opportunity to improve the quality of life and can include downsizing your home and releasing cash.
What are your next steps?
Talk to our London City Mortgage advisers if you are an older homeowner releasing equity from your property, we can recommend the lifetime mortgage to access wealth to consolidate debt, home improvements or gifting to a family member.
Learn more about what you can afford if you are releasing cash or even relocating and buying a new property using this link:
Free equity release calculator with instant results for accessing cash from your home.
Start with a free mortgage quote or call LCM and we can take your details. Our advisers are experts in equity release and can provide details about the product features of lifetime mortgages if you are moving house or releasing cash with your existing home.
