Home is where the heart is
In the UK we have a strong attachment to our homes, and to home ownership. But our houses are also in many cases our most substantial asset. The decision whether to downsize to a smaller home, or to release equity via a lifetime mortgage, is often a very emotional one.
We recently revealed, in our Last Time Buyers Report, that there are 11.4 million homeowners aged 55 or over. Almost half (47%) of these homeowners have no plans to downsize their home and many have lived in their houses for decades. There are a variety of reasons for this. For some, their house is already the right size, others don’t want the hassle or cost of moving.
But we discovered that more than one in five of those homeowners just didn’t want to give up their family home. This is not surprising; our ties to home have a scientific basis in Place Attachment Theory, which explores the emotional connection between people and places. Our homes hold treasured memories, local ties and connections. Many of us have loved, laughed and lost within the four walls of our homes. These walls sometimes even bear the marks of our lives: the ascending measurements notched on a door frame, marking the height of growing children; the scratches and scuffs that are testament to the presence of much-loved pets; the wine stain, under the rug, from that Christmas party many years ago!
We are enveloped by memories in our homes
For some of us though, our homes bear no marks. Those spotless walls are our pride and joy, they instead reveal the money, time and effort invested in transforming a house into a dream home. Our homes can reflect our personality, an assertion of our tastes and status: they are who we are. This is borne out by our Silver Spenders research, which looked at the reasons for homeowners releasing equity and revealed that home improvement is also a key driver.
And when it comes to deciding whether to move or stay, many people are driven by practical considerations: we don’t want to move because we like where we are. Close to shops, healthcare, our local pub or favourite café, our neighbours who have become our friends.
Of course the lifestyle of over-55s is changing too: many of us are still working, and enjoying it, and with that often comes a mortgage. An increasing number of homeowners are also reaching retirement age with an interest-only mortgage that is near its completion date. These households must decide whether to downsize, or find an alternative means of paying for the capital part of their property loan. The Financial Conduct Authority recently made changes to its rules, to encourage lenders to be more flexible and to engage with and help these interest-only customers.
Equity release is not a decision to be taken lightly though. The most popular form is a lifetime mortgage, which is a loan secured against your home. With an increasing range of products and features to choose from it could provide a solution worth considering.
For some people downsizing is the obvious choice, but for others there are some very real barriers to this course of action. If staying in your home is your aspiration, then equity release can be an option to enable this. But as with all major financial decisions, just be sure to take professional advice before committing to any course of action.