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Retirees urged to consider renting in retirement rather than take equity release

It may actually make more financial sense for older people to rent rather than withdraw equity from their properties, according to Girlings Retirement Rentals.

Fresh research shows that there has been a sharp rise in the number of over 55s taking equity release from their homes, but this may not necessary make financial sense, the retirement rental specialist, owned by the Places for People Group, suggests.

The Equity Release Council recently reported that almost £1bn was withdrawn by over-55s through equity release in the first quarter of this year, up 8% year-on-year.

The industry body for the equity release sector said 20,400 customers borrowed against their homes, with the average customer taking out a lump sum of £97,763 to fund everything from home extensions to helping grandchildren get on the property ladder.

But Jamie Turnbull, business director of Girlings Retirement Rentals, points out that whilst equity release suits some people, there are alternatives such as downsizing and renting which could make people financially better off.

A recent study from Retirement Villages highlighted that more than half - 55% - of over-55s said they would consider renting a home and 48% would rent with a friend.

Turnbull said: “We have seen a year on year increase in the number of people choosing to sell their family home to downsize and rent, instead of buying. One of the main benefits is to have access to all their capital without paying interest, like many people have to do when taking out equity mortgages.”

According to the advice website MoneySavingExpert the typical interest rate for a ‘lifetime mortgage’ – the most popular kind of equity release – stands at 5.1%, significantly higher than that of most standard mortgages.

Turnbull continued: “By selling up and renting people can choose to invest and earn money on their savings, as well as have a lump sum to spend on things like home improvements or helping family. Obviously with renting there are no stamp duty costs either.

“Often when people rent they can plan their finances more carefully as they know what their monthly outgoings will be, plus there are no surprise bills, which can crop up for upkeep and maintenance when people own their home. The main barrier to renting in our experience is security of tenure. However with most of our properties coming with assured or ‘lifetime’ tenancies this doesn’t need to be an issue.

“Renting enables people to downsize to a more manageable sized property, release capital, save on bills and enjoy additional benefits such as access to a ready-made community and services they may need when they are older. They can then just get on with enjoying their retirement.”

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    From what I've seen equity release is usually terrible, the T&Cs pretty much guarantee there's nothing left after the property owner had died, so unless they aren't worried about leaving an inheritance it's probably best avoided. The upside of course is that they at least get to remain in their home.
    The idea of renting in retirement whilst may in financial terms make more sense than equity release, comes with the inherent lack of long term security. Who really want's to move more than once in retirement?
    Downsizing would seem in my mind at least to have the best of both, long term security in your own home whilst freeing up capital to do with as you please.

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    • 26 May 2019 20:26 PM

    Hi Barry,

    That’s a very valid point. Retirees in particular are very concerned about security of tenure. That’s why at Girlings the majority of our properties are available on assured tenancies with index linked rent reviews, providing our tenants with a lifetime tenancy and peace of mind.

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    Retirees generally make exultant tenants, the only tenants I have ever evicted are the non payers everyone else is welcome to stay as long as they like.

     
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    ER is one of the most highly regulated mortgage products, nothing like the ER of 10 years or more ago.
    Fixed rates for life of 3.6% oe less, repay interest payments if want to
    Only talk to experianced advisor.
    Can be right for a lot of people.

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    You don’t need a Mortgage Advisor, what you need is an Auction House & get out quickly now. Housing Market has collapsed whether selling or renting it flat. I have been two my MP this for 2 years but they would rather listen to Shelter & fake media including a dedicated anti-Landlord London Radio Station. Brexit done damage granted but the biggest culprit is the Rogue Regulating & unfair rules & mad penalties, fines & sanctions just to destroy us which had been very successful, but you cut off your nose to spite your face.

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    No way still selling properties, still making a profit, still buying.
    Depends on Locationo Location

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    Good luck to you keep well away from the Smoke.

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