Citywire printed articles sponsored by:
View the article online at http://citywire.co.uk/money/article/a659618
Older 'downsizers' kickstart property market in 2013
Older home owners downsizing their homes are making the most of cheap rates being offered by lenders.
by Michelle McGagh on Feb 18, 2013 at 13:21
Older homeowners downsizing and releasing equity from their property have fuelled a jump in house prices.
Figures from property website Rightmove.co.uk show the average asking price is now £235,741, up from £229,429 in January. The figure is just £2,115 shy of the post-financial crisis record set in February 2008.
Property ‘old hands’ are fuelling the increase in price, with 71% of people who intend to sell in 2013 being over the age of 45. Half of those planning to buy this year will do so for at least the third time.
The two most active age ranges in the market are the 45 to 54 bracket, who make up 25% of those planning to sell this year, and the 55 to 64-year-olds, who make up 30% of the total sellers.
Miles Shipside, director and housing market analyst at Rightmove, said: ‘They say life begins at forty, but in today’s housing timetable you do not reach your upwardly-mobile prime for at least another five years.
‘It’s another stress to add to your mid-life crisis list that better your property lot is being pushed back into middle age, postponing your mortgage-free status and putting you at risk of being an OAP mortgagee, and possibly even delaying your retirement.’
The impact of the mortgage on pension saving could be the reason why the number one reason for selling in nine out of 10 regions, all except London, is downsizing.
Retirees may have built up plenty of equity in their homes, but not enough savings in their pension, meaning they are forced to downsize in order to release funds for retirement.
‘Those who bought thirty to forty years ago reaped the rewards of several price booms and many are now of an age where they wish to downsize, release equity and reduce their outgoings,’ said Shipside.
‘These make up the largest group of intending sellers and, in many instances, they have the advantage of being cash buyers. With increased life expectancy they face the challenge of supporting themselves financially for longer than previous generations, but have the head start of multiple-level return on their original investment in property.’
Many older homeowners with large amounts of equity are benefitting from the low rates being offered by lenders thanks to the Funding for Lending scheme – which saw the government make £80 billion available to lenders for home loans. Although the scheme was supposed to help those struggling to raise mortgages it has actually led to lenders subsidising low rates for better-off borrowers who could afford to move anyway.
‘With those trying to buy for the first time stuck at around a quarter of all purchases, nearly half pre-credit-crunch levels, in many instances the Funding for Lending scheme is not yet supporting the mass market where the improvement on transaction levels could be much more dramatic,’ said Shipside.
Although Shipside said early figures point towards an encouraging 2013, the real test will be a return to wider-spread mortgage availability.
More about this:
More from us
- First Direct launches cheapest five-year mortgage deal
- Overpaying the mortgage versus saving: what's best?
- Property: don't let lenders put you off downsizing
- Plan to help the elderly downsize: what the tabloids won't tell you
- The homeowners walking into a pension crisis
- Property and inheritance: what we're relying on for retirement
- Can £750bn of property wealth avert a pensions crisis?
Weekly email from The Lolly
Get simple, easy ways to make more from your money. Just enter your email address below
An error occured while subscribing your email. Please try again later.
Thank you for registering for your weekly newsletter from The Lolly.
Keep an eye out for us in your inbox, and please add email@example.com to your safe senders list so we don't get junked.
Latest from Investment Basics
by Michelle McGagh on Jul 29, 2015 at 10:26