Some 39% of current renters believe they will still be renting when they retire, a study found.
According to a survey of 5,000 people conducted by the Equity Release Council (ERC), just a quarter believe they will be able to own a home at some point.
The ERC said this could mean renters will have to adapt their retirement plans to mitigate the possible uncertainty that comes with long-term renting.
It said renters could face unexpected rent increases or need to move out if their rental home is sold or repurposed.
The ERC said without the stability and security of homeownership, renters would face “significant financial strain” as private rents rise faster than incomes. This comes after data from Savills suggested this would be the case, and figures from the Office for National Statistics (ONS) found average private rents had risen 8.7% year-on-year to £1,307 per month in October.
It also said the financial strain and stress of finding new accommodation, particularly at short notice, could have an “acute” impact on older people who may also have other health conditions.
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Rising rents eating into incomes
The ERC said that, last year, private renters in England with a median household income spent 34% of their earnings on rent. In London, this has accounted for between 40% and 57% of income since 2015.
As the average private rent was recorded by the ONS as £1,307 per month in October, assuming older renters only receive the full state pension – which is currently £11,502 per year – this will only leave retirees with enough money for eight-and-a-half months of rental payments.
Further, the most recent Retirement Living Standards study suggests a single retiree needs an annual income of £14,400 for a ‘minimum’ quality of life, or £15,700 in London. However, the ERC said this was assuming people were mortgage- and rent-free.
Using later life mortgages for homeownership
The ERC’s research showed later life mortgages were increasingly seen as more common, according to 39% of consumers, and more acceptable among 39% of people.
Some 29% of current renters think getting a mortgage later in life can be good while offering financial freedom and flexibility.
However, 43% of renters are confused about what mortgages are available to people later in life or retirement, suggesting this might be holding people back from exploring their options.
Jim Boyd, CEO of the ERC, said: “With homeownership increasingly out of reach for many people and forcing them to rent into retirement, it’s essential that older renters understand they still have options to climb onto the housing ladder. Innovations in later life mortgages provide a way to work around affordability restrictions for people who may previously have concluded that homeownership was beyond their grasp.
“Products such as retirement interest-only (RIO) mortgages, mandatory payment lifetime mortgages and lifetime mortgages give older customers more options than ever before. It’s crucial to understand you don’t have to be a homeowner before taking out these products on a new home.”
He added: “The rising cost of renting risks placing extra pressure on retirees’ pension savings and government’s housing welfare budget, at a time when both are already significantly stretched. By improving public awareness of the benefits of later life mortgages, more people can access the stability and security of homeownership in retirement.”
