Over 8 out of 10 high-net-worth individuals to rely on property wealth in later life

More than 8 out of 10 high-net-worth individuals plan to use their housing wealth to fund at least part of their retirement. 

Those with investable assets of over £250,000 would be expected to remain somewhat protected from the UK’s current cost-of-living crisis. 

However, according to research conducted by wealth management firm, Saltus, 70 per cent plan to use their property’s value to fund at least a quarter of their later life costs, with a further 14 per cent also expecting to rely on their home in retirement in some way. 

A changing landscape for high-net-worth individuals

Despite energy, food and fuel bills already soaring, the full impact of the cost-of-living crisis is yet to be felt, with the depths of winter expected to exacerbate inflation even further.

But already, many of those who, on the face of things, seem comfortable are starting to feel the pinch. 

Research conducted by Key Group amongst affluent individuals aged 45 and over discovered that more than 1 in 5 are either finding it harder to cope with monthly repayments due to the current cost-of-living crisis, or are concerned their outgoings will rise sharply when they’re required to remortgage in the near future.

Even those who’ve been able to cope with rising living costs have had to make sacrifices. Over half of those questioned state they’ve had to adapt their lifestyle in response to the current financial crisis, such as changing supermarkets or reducing utility usage. 

These lifestyle changes may then go some way to explaining why so many high-net-worth individuals are now expecting to use at least some of their property wealth to help fund their later life. 

But is now a good time to cash in on your home’s value, and what are your options when considering this significant decision?

The perfect time to cash in on property wealth? 

The most recent House Price Index data shows that house prices grew by 13.6 per cent year-on-year in August 2022. But that rate of growth, for the third month in a row, is slowing. 

It’s expected we’ll see a decrease in house prices in 2023 as well as into 2024 if interest rates continue to climb. 

That means those with dormant equity currently locked away in their property may now be facing a dilemma of whether to use it, or lose it - particularly those with high-value properties who’ve enjoyed a significant increase in property wealth over the last few years.  

Is downsizing the right option?

According to recent research conducted by Key Group, more than a quarter of over-45s plan to downsize in later life, with almost the same number yet to make a decision.

However, further research shows that only around 20 per cent of downsizing transactions end up with the householder in a cheaper property with fewer bedrooms. Meanwhile, a similar number, around 1 in 6, actually end up in a more expensive house with more bedrooms. And around 1 in 4 are no better off than before, ending up in a similarly-priced home.

Downsizing is used by many to free up additional funds. And the recent changes to Stamp Duty will make it more financially viable for some. 

However, as the data shows, the vast majority still fail to find a cheaper property. And with housing stock in short supply, it can be extremely difficult for a client to find a new property that meets their needs, especially if they’re planning for or are already in retirement. 

Could equity release be a better alternative? 

For high-net-worth individuals, equity release provides a financial solution that allows them access to some of their home’s value without having to make significant lifestyle adjustments, such as moving home. 

It’s becoming an increasingly popular way for over-55 homeowners to help fund their later life. And with a lifetime mortgage - the most popular form of equity release - there are no mandatory monthly repayments.

That means if your client’s circumstances have been affected by the cost-of-living crisis, or they’re concerned about what upcoming changes to their mortgage may bring, they’re able to reduce any financial pressures and remain in the home they love. 

Also, by releasing some of their property’s value, your clients are able to leave other, more tax-friendly assets, such as their pension, instate, and potentially reduce their liability to Inheritance Tax. 

Other benefits include interest rates fixed for life, ensuing protection against any further market volatility, full home ownership retention and no affordability criteria.

Expert advice is crucial

But given the unpredictability of the UK’s financial markets in recent times, and an increase in financial vulnerability, receiving the right advice is paramount for your clients. 

How Key Partnerships can help

We provide a robust referral process to help you broaden your advice proposition without compliance responsibility. 

Key Partnerships work with specialist equity release advisers from The Equity Release Experts. Our whole-of-market advisers have their fingers on the pulse to help find clients a solution to meet their needs.

Alongside supporting your clients, for every case that completes, you could also add a valuable income stream to your business. In 2021, the average Key Partnerships referral fee paid on each completed case was £1,980*.