Downsizing is not Always a Viable Financial Option

However, SHIP, the trade body for equity release, reveals that this may not always be the best financial option for the UK’s over 55s.

The UK’s over 55s generally own properties which are worth more than other age groups and thus can downsize to release equity - while remaining in the same area. 

However, a review of 25 UK local authorities with a high density of over 55s shows that in almost a third (32%) of cases, people looking at this option would either be worse off or not release sufficient money to make it worth while - when all costs were taken into account.

While others might not actually be out of pocket, by the time fees are paid and moving costs accounted for, little money may be left and the resulting move would be a traumatic wrench taking away the familiar support structure of friends and family.

For instance those in Torbay (+£60,939) and North Lincolnshire (+£58,810) could release a significant amount of equity if they chose to downsize.  However, those in Devon (+£6,361), Cumbria (+£11,734) and West Sussex (+£12,544) might argue that the upheaval and potential costs associated with moving negate the relatively ‘minor’ financial gain.

In addition, while they could benefit financially from downsizing, they may be forced to move out of the area that they have lived in for many years – leaving the locality they have become accustomed to and moving to an unfamiliar area.      

Andrea Rozario, director general of SHIP comments:

“For many people, the home is their largest asset and releasing some of the equity will help them finance their retirement. 

"The best way in which to do this depends on each individual’s financial situation and preferences.  However, equity release and downsizing should both be considered – they are not mutually exclusive and can work very well in conjunction.”