The Downsides of Downsizing Will Leave the Door Open for Alternatives like Equity Release

The coronavirus pandemic has shaken up the entire world. Mask-wearing, obsessive hand-washing, and social distancing have now become the norm (for most of us). It’s amazing how easily millions of us have slipped into changing so many of our behaviours. Hopefully we are approaching the final furlong of the worst of Covid, but the change in society both in terms of actions and indeed outlook still has a long road left to travel.

For those approaching retirement, the pandemic has certainly had an impact on their mindset. Retirees, like everyone else, did not predict that a global outbreak would suddenly grind the world to a halt, and they have wisely decided to plan ahead. Even without the first serious global pandemic for 100 years going on around us, planning for retirement can be stressful enough – so both the current and next crop of retirees need to think extra carefully about their finance plans.

According to research from Retirement Villages Group (RVG), the pandemic has had the direct result of pushing as many as 12% of over 70s into looking at downsizing[1]. And for many homeowners this will be the right call. Downsizing has many plus sides, most notably the dual benefit of cashing in historic house price inflation and living somewhere that is far easier to maintain. In fact, RVG’s research showed that nearly two-thirds (65%) of respondents admitted that their current home was too large to maintain in retirement[2].

However, although downsizing will be right for many people it won’t be the best fit for others. There are, as we all know, downsides to downsizing. For example, although most people will be looking at downsizing as a way to secure some much-needed cash to help fund retirement, the cost of moving can be punishing. Estate agency fees, removal costs as well as the now back in effect Stamp Duty charges can all add up to a total cost well into five figures.

What’s more, beyond the immediate financial strain downsizing can bring, uprooting your life in later age and moving to an area that could well be far from friends and family is not ideal. Older people want to be closer with their family – both literally and in terms of offering a helping hand – so staying put can be important to them. We can see this by looking at the inverse of RVG’s stats. If 12% of people are now looking to downsize, this means the vast majority are still keen to stay where they are.

Ultimately, downsizing will continue to play a key role in later life planning for millions of homeowners. However, the mortgage industry has just as big a part to play as well. Options like remortgaging in later life or exploring avenues like equity release will continue to be critical considerations for retirees up and down the country. And with the pandemic hopefully now drawing to a close, I predict many more people will look to access their property wealth and kick start their retirement in the same house they call home.


[1] https://www.financialreporter.co.uk/later-life/pandemic-prompts-imminent-downsizing-plans-for-one-in-eight-over-70s.html

[2] ibid