The Council’s research shows the average UK homeowner aged 55+ paid £100,756 for their existing home. Having lived there for an average of 17 years and 10 months, they now estimate it is worth £257,584.
This equates to an overall house price rise of 156%, leaving them with an extra £156,828 of equity even before mortgage repayments are accounted for. This figure alone is more than six times the average single DC pension pot at retirement (£25,000) and almost three times the average amount used to buy an annuity (£55,750).
However, The Council’s analysis suggests even this may underestimate the individual housing wealth held by over-55s. According to the Office for National Statistics, the average UK house price has risen by 244% over the last 17 years and 10 months.
Having originally been bought for £100,756 at the start of this period, the average property among over-55 homeowners could therefore have a value of £346,861 today: almost £90,000 (£89,277) more than they estimate.
Across the UK, over-55s think house prices in their region have increased by an average of 4.4% in the last year, compared to an actual rise of 6.1%.
Over the last decade, over-55s estimate that house prices in their region have risen by an average of 21.8% compared to an actual rise of 42.8%. Homeowners in every region, except the East Midlands, underestimate regional house price growth in the last ten years.
Asked to consider the role of pension savings and property wealth in funding later life, The Council’s research suggests four in five (80%) homeowners aged 55+ would consider using housing wealth to get the most from their retirement.
Among those who would consider using their housing wealth to help pay for retirement, downsizing is the main preference (42%). However, almost one in four (22%) would prefer to stay in their current home and use a lifetime mortgage to release some equity. The remaining 36% – more than one in three – are open to either option based on their circumstances.
Nigel Waterson, Chairman of the Equity Release Council, commented:
“It is no secret that the property market has been kind to many homeowners, but it is remarkable to see how far people underestimate the potential size of their housing wealth, which puts the average pension pot in the shade.
“At a time when savings are scarce and retirees face an uncertain financial future with the end of generous final salary pensions, these findings prove just how important it is that property wealth plays a role in financial planning for later life. They also show a large number of people are looking for help to decide how using their savings, equity release or downsizing can work best to meet their individual needs.
“It is vital the Government acts on the Treasury Select Committee’s recommendation to include housing wealth within its pensions guidance service. It must also work with industry and regulators to improve access to advice, so people can consider all the options open to them in retirement and choose the one best suited to their circumstances.”
