Embargoed until 00.01 on Thursday 26 March 2015

Money shortfalls mean one in ten older homeowners miss a meal every week

–          31% experience stress for financial reasons, 30% face sleepless nights and 9% suffer the cold each month because of unpaid bills – despite having £241,000 of property wealth as a potential resource for income

–          24% have relied on housing wealth at a younger age by remortgaging for extra funds

–          20% have been refused or put off getting a residential mortgage since passing the age of 55

–          34% keen to discuss property wealth as part of the new ‘guidance guarantee’

Homeowners over the age of 55 are routinely skipping meals, leaving bills unpaid and struggling through the final days before their next pay-check or pension payment – despite having an average of £241,000 in housing wealth that they could potentially draw on, according to new research from the Equity Release Council (The Council).

Specifically, almost one in five (19%) have gone without a meal at least once a month for financial reasons in the last year, rising to 21% among those aged 65-69 and 80+. One in ten overall (10%) have had this experience every week, rising to 12% among 65-69s.

As a result of financial concerns, The Council’s research also shows that at least once a month over the last year:

• 31% of over-55 homeowners have experienced stress;
• 30% have had at least one sleepless night;
•  19% have argued with a partner or family about money;
• 17% have struggled immediately prior to their next pay-check or pension instalment arrives;
• 12% have lied or concealed the truth about money from loved ones;
• 9% have been late paying a utility bill;
• 9% have felt cold because of an unpaid bill.

Comparing different age groups, the findings suggest the biggest financial pressure points in later life are between the ages of 55-59 and 65-69 (see table 1). Their difficulties come despite over-55 homeowners possessing an average of £241,000 in property wealth through the home they live in.

Table 1: Percentage of over-55 homeowners who have experienced the following for financial reasons at least once a month over the last year

Figures combine those who answered once a month/fortnight/week/every other day/every day.

Nigel Waterson, Chairman of the Equity Release Council, comments:

“These findings are a stark reminder of the financial pressures many people face in later life and counter the perception that many have of the baby-boomer generation as universally carefree and prosperous. Despite benefiting from rising house prices which have boosted their property assets, many homeowners are cash-poor in later life and still find it a struggle to meet routine costs.

“It is an alarming state of affairs that so many feel forced to skip meals or go without heating because their pensions or savings fall short of covering even these basic necessities. Rather than suffering in silence, we must increase peoples’ knowledge of their options and encourage more people to take advantage of the property wealth they have accrued to fund a more comfortable lifestyle.”

Almost a quarter of homeowners routinely tap into housing wealth

Almost one in four over-55s homeowners (24%) have already used their housing wealth to boost their finances by remortgaging to release cash during their lifetime. Those taking this course of action have typically done so twice while 24% of this group have tapped into their housing equity three times or more.

While the most common reason is to pay for home or garden improvements (45%), significant numbers have used their housing wealth to pay off loans or credit cards (29%) while 7% done so to cover everyday costs or pay regular bills.

However, the ability to remortgage decreases with age: one in five homeowners (20%) have been put off or unable to do so since turning 55 because of their age. Almost one in ten (9%) have been refused a loan – including 4% in the last year – while a further 11% have been put off from even applying because of their age.

The Council’s research also shows financial pressures have prompted 10% of over-55 homeowners to downsize; yet for 75% this option has very limited or no appeal. More than one in three (35%) say they would only downsize reluctantly as a last resort while 40% wouldn’t do so under any circumstances, rising to 42% among over-70s.

Table 2: Homeowners’ attitudes to downsizing to free up more cash for their retirement

Equity release products – typically lump sum or drawdown lifetime mortgages allowing people to unlock up to 52% of the value in their home¹ – offer an increasingly popular alternative, with the number of new plans rising 12% in the last six months.²

As well as being available to customers in their 60s, 70s and beyond, the products offer an unlimited term (lasting until the customer passes away or moves into long-term care), the guaranteed right to tenure and no negative equity guarantee.

Such protections mean lifetime mortgages are funded and therefore priced differently to residential mortgages. But given the option to extend their mortgage into retirement, The Council’s research shows a majority (60%) of over-55 homeowners would be willing to pay a higher interest rate in exchange for greater protections.

Nigel Waterson, Chairman of the Equity Release Council, comments:

“Many homeowners have regularly remortgaged as a way to use their housing wealth to their advantage. Doing similar in retirement through a lifetime mortgage is a rational choice in many cases. It makes no sense to abandon this option later in life when many people are cash-poor, asset-rich and have much to gain in terms of a more comfortable and financially stable lifestyle.

“Putting money into property is one of the most reliable ways to grow your wealth, even if it simply happens as part of life rather than as a conscious investment. Using equity release to realise these gains should be seen as a positive step that gives a financial boost and enriches lives, without people having to move on from the place they call home.”

Government must point homeowners to consider housing wealth

From 6^th April 2015, the government’s new ‘guidance guarantee’ service – Pension Wise – will launch for over-55s to provide impartial guidance on using their pension savings to fund their retirement.

When asked about which topics they would like to cover when they receive guidance on retirement planning, over-55 homeowners rank property (34%) as their third biggest priority, after pensions (53%) and investments (37%) and ahead of benefits, paying for care (both 33%), inheritance (30%) and debt (17%).

Nigel Waterson, Chairman of the Equity Release Council, concludes:

“The new pension freedoms give people more reason than ever to think hard about how they plan to fund their retirement. Many will relish the chance to take more control of their pension, but sadly the reforms are not a silver bullet to cure the common concern of how to make a modest savings pot last the course.

“In many cases, the best solution will be to draw on a range of products at different stages of retirement and make the most of all the assets people have gathered, including property. Overlooking the option of equity release could mean missing out on a greater degree of financial comfort than many people’s pensions can provide on their own.

“We urge anyone nearing retirement to make the most of the government guidance but we also hope this encourages more people to seek out independent financial advice to understand their options in full. Professional, qualified advice remains the best way to plan effectively for the future.”

-Ends-

Notes to editors

For further information, please contact:

• Andy Lane, Victoria Heslop or Sam Fisk, The Wriglesworth Consultancy, on 020 7427 1400 or email [email protected]

Methodology

Research conducted by Atomik Research in March 2015 among a representative sample of 2,000 over-55 homeowners across the UK.

¹ While 52% is the maximum loan-to-value (LTV) available, the typical equity release customer unlocks a significantly smaller portion of their housing wealth: the average first instalment of a drawdown plan is worth 16% of the customer’s total property value while the average lump sum withdrawn is worth 28%.

² Equity Release Council – Equity Release Market Report, Spring 2015

About The Equity Release Council:

The Equity Release Council is the industry body for the equity release sector. Built on the legacy of Safe Home Income Plans (SHIP), The Council represents over 350 members; namely, providers, qualified financial advisers, solicitors, surveyors, intermediaries and other industry professionals – each committed to The Council’s Statement of Principles that aims to ensure consumer protections and safeguards. In addition, The Council works to boost consumer knowledge and increase awareness of equity release as a solution to financial challenges facing people over the age of 55 across the UK.