One in four retired homeowners hope to cash in by downsizing

Household finance
Household finance

Nearly three quarters of the UK’s 10.4 million pensioners own their own home, although more than a quarter expect to sell their property to raise money or simply to make their life easier, according to new research1 from Prudential.

Four in every five (81 per cent) retired homeowners who expect to sell are planning to buy another property. This is equivalent to around one million homes being bought and sold by pensioners, many of whom will release substantial amounts of cash by downsizing.

The majority (73 per cent) of retirees who plan to sell up and buy another property want to move into a smaller and less expensive home. On average, they expect downsizing to raise as much as £62,000.

Nearly a quarter (23 per cent) plan to use the money raised to boost their income in retirement, 13 per cent will pay off debts and eight per cent say they’ll use the money to help with everyday living costs.

Prudential’s research also shows that over one in five (22 per cent) retired homeowners still have an outstanding mortgage, with average monthly payments of £254.

The convenience of running a smaller home was the most commonly stated motivation for those who plan to downsize – 48 per cent say they want a simpler life. Separately, 22 per cent claim raising money is the main driver for their sale, while 11 per cent want to reduce household bills.

Stan Russell, retirement expert at Prudential, said: “Housing wealth is potentially a significant source of additional retirement income for pensioners who own their own home. This is why so many of Britain’s pensioners are planning to become last-time-buyers.“However, it is dangerous for people to assume that housing wealth can make up for a lack of retirement planning. To ensure a comfortable retirement it is important to start saving as much as possible as early as possible, and to seek professional financial advice on the best retirement income options.

”Staying on the property ladder remains the overwhelming preference among retired homeowners. Just six per cent of pensioners planning to sell their home intend to move into specialist retirement accommodation, while only four per cent expect to move into a rental property.

“For some retired homeowners, moving to a smaller home is a lifestyle choice, but for a significant number the decision is a financial one. Our research also shows the financial nous of many pensioners – the majority of retired homeowners expecting to sell their property plan to buy a smaller home rather than rent, saving themselves on average £168 per month on the difference between average mortgage and rental costs.”