Many people approach retirement and start to see the term ‘downsizing’ creeping into their lives a lot more. With the children gone from the family home – maybe even owning a family home of their own – and general upkeep on a large property starting to become not just a burden but a difficulty, selling up and moving to a smaller property can be an appealing prospect.
With the constant news of the UK’s housing crisis, wannabe-first-time-buyers unable to get onto the property ladder, and a supposed lack of affordable housing, the financial watchdog has declared that the older generation could look to sell their homes to ease the crisis.
Lynda Blackwell, head of mortgages at the Financial Conduct Authority, said Britain had a “real issue with the last-time buyer”, calling older property owners ‘home blockers’ and expressing frustration that “there’s older borrowers who basically pay off their mortgage and sit quite happily in a very big house”.
Understandably Blackwell’s comments have been met with anger, but think about it further and her comments do spark the beginnings of a debate.
While the government focusses on ways in which they can provide incentives for first-time-buyers to get on the property ladder – 95% mortgages, the help-to-buy scheme, the new help-to-buy ISA – should more be done to help those older homeowners who can’t afford to leave their homes?
Research from Bower Retirement Services showed that around 1 in 5 retirees were interested in downsizing, but costs and available housing were blocking them from doing so.
Not only that, but with the growing crisis at the other end of the spectrum, children or grandchildren may not have the opportunity to own their own home: hanging onto the property for inheritance purposes later down the line could be another big factor in staying put in a property.
By introducing incentives to downsize for those who want to – whether this be a cut in stamp-duty or an increase in retirement properties being built across the country – a number of opportunities present themselves.
Not only will those who wish to downsize have the option to do so, and not be out-priced by the cost of fees, but they also won’t risk losing touch with local friends and family if suitable homes are available to them in their area.
There also comes the boost in liquid assets as the equity in the larger home will get released. Depending on the reports you read, this is often between £70,000 and £87,000. This solves the problem of the lack of inheritance, as this money could go towards helping younger loved ones should they need the assistance.
The freeing up of larger homes should, in theory increase availability nationwide - in turn bringing down average house prices.
It will be interesting to see whether the government takes heed of the comments from Lynda Blackwell, and doesn’t just fob them of as ‘obscene’ or unfair. Rather than focussing solely on incentives for first-time-buyers, also start to help those at the opposite end of the property ladder who cannot feasibly downsize.
Doing so should open up opportunities for all, and go some way to easing the problems that continue to grow in the housing market.
Ryan Smith writes on behalf of Compare Annuity, an annuity calculator for those approaching retirement.
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