One in Five Home Owners Plan to Use Their Property Equity to Fund Their Retirement.

One in Five Home Owners Plan to Use Their Property Equity to Fund Their Retirement.

Hardly surprising when you consider the property boom years between 1983 and 2007 which has left a lot of retired and about to retire individuals with a large chunk of equity in their property.  Until the chancellor announced the bizarre changes to tax relief for landlords in 2015, the most common way to utilise this was to use a portion of it as a deposit for a buy to let mortgage, purchase a second property and live at least partially on the rent from this.  This situation was of course particularly suited to this generation, many of whom are tradesmen, or know a number of tradesmen, or at the very least capable of carrying out many DIY tasks such as decorating etc.

Advantages of this situation to the retirees were that it made up for the very poor returns on pensions both at that time and into the present day and didn’t reduce the overall amount they could leave their beneficiaries when they died.  There were some disadvantages insomuch as the equity in their property could be often be accessed by local authorities if health issues meant they had to go into care at any point and it also tied up a portion of their equity.  It often also meant they had to carry out at least some of the physical work of renovation or maintenance on their property, but most health professionals would class that as a benefit rather than a negative point.

In terms of the rental market, possibly not so much in London, but in the rest of the country it increased the number of properties available to rent with the laws of supply and demand acting as a force to keep rents in check.  The other benefit being that a lot of the properties were in the middle to lower price range which meant the above benefitted the less well off in society.

The effect on the housing market was certainly inflationary again, due to the effect of supply and demand, but having said that, with the gift of hindsight we can see that following on from the catastrophic recession of 2008/9 the average house price has continued to rise above pre-crash levels with not such a great change in the rate of rise with feedback Which Network has received from a number of UK mortgage Brokers suggesting that the effects of Brexit probably acting as a break on house prices more than these changes.  The only real difference being that the benefit is now being felt by large institutions and companies rather than individuals.

Successive chancellors have stated that they will review these changes but so far none seem to have had the courage to make any changes to the new status quo.