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18 Oct 2024 | 8 minutes to read
Age is but a number, and now more than ever: Brits are living longer and many of us are kicking retirement into the grass for one day in the future. The state pension still kicks in for sixty somethings, but they are proving that this is just the start of the future. Whether you dream of moving to sunnier climbs, a tranquil life in the country or freeing up the funds to give your loved ones a helping hand, there are many drivers for moving house a little later in life.
We each need an annual income of £31,300 to retire comfortably in the UK, according to analysis from the Pensions and Lifetime Savings Association. And as property continues to hold its own against rising living costs, a growing number of people are considering ‘downsizing’ to supplement their retirement. “Clients and their family members increasingly recognise property as their most valuable financial asset alongside their pension,” Gary Taylor, Private Client Director, Financial Planning says. “If you have a large family home and the children have flown the nest, selling up and buying something smaller or relocating could be the answer to a more comfortable and less constricted future.”
But it’s not a given that downsizing can fund retirement, as CBAM Financial Planner, Lynne Foulds explains. “This would depend on the size of the property, the area of the property, the price involved and the market at the time. Downsizing plus paying towards pensions can be a good way to save for retirement – as tax relief and compound growth over many years in a pension may outperform the property market.”
Inflated living costs have prompted many ‘empty nesters’ to evaluate their home environment sooner than was once the norm. “Squeezed retirement income has shone a light on rising home-related outgoings like energy costs, council tax and insurance. Big properties require time, effort and money, and there’s little point in heating rooms that are not used regularly. As we struggle to maintain large gardens physically as well as financially, they too may begin to feel more of a burden,” Gary explains.
“All of these commitments can start to feel unnecessary in larger houses, especially in a household that has shrunk due to children moving away or now living alone. Downsizing your home could be your chance to find a suitable space that you can comfortably maintain and thrive in for many years to come.”
It’s taking longer for our children to fly the nest, with the average young adult spreading their wings at 25 years old. And with many of us choosing to start families later in life, there’s a timely overlap between retirement planning and giving our loved ones a helping hand.
“Many people want to advance their inheritance and borrow against their properties to do so,” says Edward Riordan, Manager, Mortgage Advice Service at Close Brothers Asset Management. “We see a number of clients choosing to gift to their children or their grandchildren so they can help them buy their first home.”
Add to this longevity coupled with the growing cost of long-term care, and many are considering living near family. Yet this can present challenges.
“As our children gravitate to cities and then suburbs close to work, they may well be enjoying the salaries that city living demands,” says Edward. “For parents of adult children, there are many benefits of living closer to family, but house prices should be a consideration. They need to be clear on their budget and comfortable with the home that will allow if they’re moving from the north to the south, as an example.”
But location can be deceptive, says Lynne. “Even if you’ve moved to be closer to family, it’s important to ensure that the property is the right proximity to these family members. Space should still be a consideration – think hard about how many bedrooms you need for your grandchildren and extended family to stay before committing to a smaller property in what seems the right location.”
If you’re considering a house move, think long and hard to ensure your new home goes the distance. “Buyers should think of the lifestyle they want for the future,” adds Lynne. “Is the property on one level for accessibility needs in the future and how easy will it be to maintain in later years? How independent do they hope to be? How does the new environment lend itself to building a social circle – does it have a good sense of community, is help going to be on hand? This is where retirement villages prove popular.”
Edward agrees. “Moving is time consuming and change is expensive. Add to that the stress of a sale and purchase, and it’s important that all things are considered to make your new home a forever home.”
Money is far from the only driver for moving home later in life. Edward tells us that a growing number of clients see their home as the route for a fulfilling future. “I have one client looking at a move from Scotland to the south of England so they can be closer to family, while others are motivated by a total lifestyle change. If you’re nearing retirement and have spent your working life living in a city or the suburbs, it could well be that relocation to a more peaceful and picturesque location provides a welcome change of pace and scene. Many clients who’ve swapped in the suburbs for the coast or the countryside tell me it’s completely transformed their lives. One couple made the move from Surrey to the Welsh countryside and are now enjoying a country cottage with a couple of acres. Money definitely goes further outside the commuter belt.”
But it is important to look at the locality as well as the property to ensure if it will go the distance. Consider whether there is enough of a community if you’re relocating, and whether the transport links and local amenities such as doctors’ surgeries are likely to meet your needs in future.
As Lynne says, “Don’t be fooled by the lure of a picture-perfect property. Buyers need to think with their heads as well as their hearts so that if they intend to purchase their forever home, it lives up to expectations.”
Historically there have been few options for the sixty-plus generation to fund a house move. Interest-only and repayment mortgages are typically capped at between 75 and 85 years of age, and whether their terms are limited or fixed, borrowers will be impacted by interest rate changes.
“We talk through budget with clients, from first time buyers to retirees, to ensure their vision is affordable and attainable. Buyers need to be confident that if interest rates increase when their five-year fixed rate mortgage expires that they can afford to sustain this. Affordability is particularly squeezed at the moment because everything is so expensive but we’re expecting rates to come down and the picture to improve. We don’t yet know where the ‘new normal’ will be. Reductions are coming, although they’re unlikely to be drastic, and as we live in uncertain times, it’s important that everyone is prepared for these.”
Lenders have a growing appetite to lend to older borrowers, however, with an increasing number offering equity release mortgages. The most common of these is a lifetime mortgage which is available for homeowners aged 55 and above. As with a traditional mortgage, lifetime mortgages are a loan against the value of the borrower’s property but without a specific time limit or end date. A sale can either be triggered by a need to release funds for long-term care or upon the death of the owner (or the last surviving owner). Upon sale of the property, the loan will be repaid.
“A lifetime mortgage can open many doors for homeowners, whether they are looking to gift money or advance inheritance to children taking their first step onto the property ladder,” Edward explains. “We have some clients who decide later in life to buy a rental property and secure a diversified income stream while others simply want to go on a world cruise and enjoy their retirement when they can.”
Budgeting should not be overlooked in the present climate, Edward says. “While many of this age group will have experienced record-level interest rates first hand, borrowing twenty years ago was typically for much smaller sums than those needed to fund properties today. With no monthly payments, lifetime mortgage holders are typically sheltered from interest rate movements, but the interest is added to the value of the loan against the property in question. While property values can rise, this can in turn have a compounding effect on the equity left following a sale.”
Whether you’re relocating, downsizing or investing in a holiday home or buy-to-let, be prepared for some upheaval. “From the sale to de-cluttering your current home and the move, this is a process that requires time and patience,” Lynne says.
“Most people are well aware of the stresses involved with the financial and legal aspects of a house move, which include dealing with estate agents, solicitors, jittery buyers and impatient sellers. But the move itself should not be taken lightly,” Gary adds. “It’s unlikely you’ll want to give up the family home and uproot your life as soon as you finish work - especially if you end up moving away from loved ones and there’s no space for them to stay over.”
Gary advises sharing your aims and objectives with family and friends so you can be sure you make the right decision regarding your move. “As you would expect, there will always a financial cost to moving, but there are emotional factors to consider too. Any changes to your circumstances should always secure or enhance your future financial and personal wellbeing – if it doesn’t, think very carefully.”
Whether your move has been motivated by a change in lifestyle or financial gain, make sure you invest time and research to help you make the right decision. “The good news is that selling your main home does not normally result in a tax bill,” says Gary. “However, you could be liable for stamp duty on the new property together with the associated moving costs.”
Lynne stresses the importance of seeking professional advice before you make any purchase. “If a client has a large estate, the proceeds from downsizing can also be used to gift capital out of the estate to help reduce their Inheritance Tax liability,” she says.
With the right level of research and consideration, there’s much to be said for moving later in life. As Gary says, “Moving can be a great cleansing exercise and knowing there’s no need for future upheaval can be liberating. You have done the hard work whilst you are fit and able.”
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