Home equity is becoming increasingly important in retirement planning: Aviva

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The role of real estate assets has become increasingly important in planning for retirement, reveals a new survey from Aviva.

The research, which surveyed 1,507 general consumers aged 45 and over, looked at levels of spending, saving and attitudes towards retirement funding among those over 45.

The latest data shows that there has been a decrease in real estate ownership compared to six years ago, either directly or with a mortgage, particularly in the younger age groups of this sample.

Almost a quarter of 45-54 year olds were freehold owners in 2016, this figure fell to 16% in 2022, while for 55-64 year olds the figures were 48% and 45% respectively.

The data reveals that mortgages are being paid off later than they were six years ago.

Six years ago, 13% of people aged 65 to 74 had a mortgage, compared to 9% in the same age group this year.

The duration of occupation of the same property has remained stable since the last survey in 2016, at just under 20 years, compared to 21 years in 2016.

Those who are outright homeowners have generally been in their property longer at age 22, compared to 16 years for people who are homeowners with a mortgage.

Aviva says mortgage-free people also benefited from six more years of rising house prices, boosting their home equity.

Average house prices rose for this age group to £287,000 from £264,000 in 2016, representing an increase of 8%,

The effect of rising house prices is even stronger for older age brackets, the data shows, especially for those who bought their current property before the property market boom of the late 1990s.

The average value of homes in the 75+ age group in the survey is £310,000 and their average length of residence is 28 years.

In 1994, when they bought their property, the average house in the UK cost £54,623, representing a five times increase in equity.

For people aged 65-74 with an average tenure of 24 years, buying their current home in 1998 when the average cost of ownership was £66,231, compared to an average of £302,000 in 2022.

Aviva says this accumulated property wealth, resulting from the growth of the UK housing market, will for most far exceed the resources they have available for savings and investments.

Taking into account the average outstanding mortgage outstanding, the amount of equity people have in their property is typically just under £195,000.

Aviva notes that this compares to the average held in savings and investments, of £52,000 and shows the importance of considering all sources of wealth when planning finances later in life.

Aviva Equity Release Managing Director Matt McGill says: “In the years since we last conducted this research, significant events have impacted the way people view the economy, their future and their retirement plans. Understandably, far more people now cite worries about the economy as their top concern in retirement.

“Despite all of this, the UK housing market has seen a steady upward trend since many current pensioners have bought the house they still live in. But less than half (42%) of the people we polled said their home was worth more than their savings and investments, yet evidence shows that the equity in people’s properties is worth almost four times their savings.


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