Tenant News

Retirees may be Better Off Renting than Taking Equity Release

Rose Jinks - May 21, 2019

Retirees may be financially better off renting than taking equity release, according to Girlings Retirement Rentals.

The Equity Release Council recently reported that almost £1 billion was withdrawn by over-55s through equity release in the first three months of 2019 – up by 8% on the same period of last year.

The industry body for the equity release sector found that 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 onto the property ladder.

Jamie Turnbull, the Business Director of Girlings Retirement Rentals, says that, while equity release suits some people, there are alternatives, such as downsizing or renting, which could make retirees financially better off.

A recent study from Retirement Villages highlighted that 55% of over-55s would consider renting a home, while 48% would rent with a friend.

Turnbull says: “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 advice website MoneySavingExpert, the typical interest rate for a lifetime mortgage – the most popular type of equity release – stands at 5.1%, which is significantly higher than that of most standard mortgages.

Turnbull believes: “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.”

He adds: “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.”