The rise and stall of the last-time buyer

According to recent research conducted, there are somewhere between 3.1m and 4m householders aged 55+ in the UK who plan to downsize at some stage during retirement. That could unlock around £469bn of equity based on some estimates. 

But will this huge pool of potential ‘last-time buyers’ (LTB) ever be able to make this final move, and what challenges will they face in their search for the perfect retirement property?

The Mini Budget

The Chancellor’s Mini Budget announced on 23 September signalled, amongst other things, this Government’s determination to keep the fires of the UK’s property market well and truly stoked.

Without any doubt, the focus of the property headlines spawned by the details of his proposals was on the boost to first-time buyers in particular, as Stamp Duty (SDLT) regulations were immediately skewed in favour of those stepping on to the housing ladder for the very first time to buy lower value properties.

But what about those in later life nearing the very top rung?

Much has been written about the rise of the LTB in recent years as more and more of the UK’s property wealth has accumulated amongst people aged 55 and over. 

As nests empty and children move on, many older homeowners are faced with the dilemma of owning a house that holds many cherished and precious memories. But it’s also one that’s, undeniably, far too big and potentially impractical for their own later life needs.

Downsizing can be a complex and complicated process, both financially and emotionally. The desire to hang on to familial memories and stay close to friends and communities can be at odds with an aspirational desire, or even a financial need, to look at an alternative property, location and lifestyle.

However, even the term ‘downsizing’ can be misleading. The inference from that term is that a person is moving to a smaller and probably cheaper property. But this is not always the case. And releasing equity is not generally the prime motivator for the last-time buyer.

The facts behind downsizing

Research carried out by the NHBC Foundation five years ago showed that around 1 in 5 (19%) of downsizing transactions ended up with the householder in a cheaper property with fewer bedrooms. 

But a similar number, around 1 in 6 (16%), ended up in a more expensive house with more bedrooms. And around a quarter were no better off than before, having ended up in a similarly-priced home.

Barriers to downsizing

Arguably one of the biggest barriers to the true downsizer is the lack of suitable, affordable housing stock in the UK.

As people enter later life, certain housing features and styles become more appealing – including, of course, the stair-free living of bungalows.

Demand for bungalows is growing, according to research by McCarthy Stone. It found that 70% of over-65s would consider buying one just at a time when the building of new bungalows is at an all-time low.

According to the same research, in 2020, just 1,833 new bungalows were built in the UK compared to the 9,347 built in 2000. 

With current planning legislation tending to favour high-density developments over bungalows and age-restricted properties, it seems we’re some way off being able to satisfy the needs of many of the sizeable number of potential last-time buyers.

One potential solution to the dilemma LTBs face is equity release.

Equity release could be the solution

For those who are determined to stay in their family home but who need help with making adjustments to the layout - for example, to add a downstairs wet room or more accessible doorways in order to make the space more liveable and future-proofed against advanced age and mobility issues - then equity release can be a solution that completely removes the need to downsize.

Even for those not at the point of thinking about personal care needs, equity release can provide the solution that helps someone balance their retirement finances. Whether that’s repaying existing debt to reduce outgoings or modernising dated fixtures in order to reduce energy bills.

And for those determined to make their move to a new home, equity release can provide the bridge required when that new property is perhaps in a more desirable, more expensive location.

The use of equity release for property purchase – once a little-known and rarely-seen part of the market – has grown in recent years; fuelled most recently by the ‘race for space’ during the height of the pandemic as more people looked to secure bigger homes with greater outside space in response to enforced periods of lockdowns and travel restrictions.

Those chasing a retirement cottage dream in a buoyant property market may find that their finances can’t stretch to secure the property. But equity release is a potential and highly-flexible lending solution that could deliver the outcome they need.

The importance of expert advice

Whatever the motivations behind a last-time buyer’s property purchase decision, the importance of specialist, expert advice cannot be underestimated. 

The borrowing needs and financial aspirations of later life clients can be complex and wrapped up in emotional as well as logical decision-making. Getting the right advice on the spectrum of lending options available is as crucial to their ‘last-time buy’ as it was their first.

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*.