Retirees should be given tax breaks to downsize their homes, a major property group says.
The National Association of Property Buyers said the move would help reduce the number of people tempted to take advantage of rising equity releases.
Jonathan Rowland, spokesman for the National Association of Property Buyers, said: “We would like to see stamp duty cuts for pensioners selling their own homes. It allows them to move without a hefty SDLT penalty and certainly encourages them to do so more. Currently, a pensioner selling a family home for £700,000 to buy it for £500,000 will face a stamp duty bill of £15,000 and with other costs such as an estate agent and solicitors it will cost them around £30,000. This is a figure many simply cannot afford to pay when moving out of their beloved family home. Government stamp duty receipts have more than doubled in the last ten years so there is certainly scope for targeted reductions to help free up stocks.
The idea comes after a new survey showed the number of homeowners releasing equity in their property rose more than 20 percent to 23,395 between January and March, a new quarterly high.
The Equity Release Council said that although the number of people using equity products is not at the same level as before the pandemic, the average loan amount rose by six per cent in the 12 months to March 2022.
A total of 150,653 new and existing customers have taken advantage of the equity release since March 2020, compared to 171,586 in the previous two-year period.
Meanwhile, total borrowing was £1.53bn between January and March, up from £1.34bn in the previous three months of 2021.
The average new loan rate has grown by 6 per cent a year, matching the latest inflation figures and outpacing the 11 per cent annual increase in UK house prices, which has added £27,000 to the average home.
Mr Rolande, founder of Buy Home Fast, said the government needed to think “outside the box” to come up with solutions to the growing housing crisis and that equity releases were growing in popularity.
“More and more people are thinking about leaving equity,” he continued. On the face of it, this is understandable as these schemes allow home owners who are at least 55 years old to access the equity (or cash) in their property.
“However, there are significant downsides. Equity issuance can be expensive and more expensive than bonds. The average interest rate on lifetime loans is approximately 4%, with the lowest rate approaching 3%. Interest is also on the rise.
By choosing not to make voluntary payments to reduce debt and debt, interest compounds. In addition to interest, several fees are also charged. Lifetime mortgages are intended to extend the life of the home owner and therefore selling the property through an equity release plan can be eye-watering in terms of value. Not only can the debt be paid off, but the early repayment costs can also be high.
When a home repossession plan is in place, the home owner no longer owns all of the equity in their home. With a lifetime mortgage, the homeowner is affected if the home’s value goes down.
Leaving equity will also affect other benefits such as Pension Credit and Universal Credit etc.
“One thing I can’t stress enough is that an equity release should always be a measure of last resort. For many, it is a useful and useful product, which allows the opportunity to live a better life or to finance a property, business or dream holiday. But once it’s gone, it’s gone, and further borrowing can ruin any future gifts or inheritance.
Last week, the NAPB warned that if Rishi Sunak and Liz Truss become Prime Minister, they must put tackling the housing crisis “at the top of their list”.
In a statement, he said: “Over the past two weeks we have heard talk of how Lease Trust or Rishi Sunak will solve the housing crisis.
“This is very worrying because an entire generation of young people are currently facing the reality that they cannot afford to rent a property, let alone own a home.
“It comes down to one issue and one issue only – supply.
“We are facing a shortage of affordable, new homes that the market desperately needs in all parts of the country.
“It is very important that whoever wins this race to be prime minister sets out a vision of how we are going to solve this issue.
“We need a housing minister who can stay on post for more than five minutes and get on with the job of delivering.”