Housing policy should be refocused from first-time buyers to last-time buyers who want to downsize, a report from the Centre for the Study of Financial Innovation has recommended.
The government could do more by encouraging downsizing by looking at capital gains tax and stamp duty, both of which are barriers.
If older people were encouraged to use their housing wealth they could fund their retirement and cover the rising cost of care, while they would also free up housing for the next generation.
The study said there needs to be more focus on supplying suitable ‘affordable’ homes for last-time buyers, as well ‘retirement homes’ for those requiring more help.
The study was by professor Les Mayhew of Cass Business School with support from Aldermore Bank.
Sue Hayes, group managing director – retail finance, Aldermore, said: “People in the UK are living longer, healthier lives, providing greater opportunity for their retirement compared with previous generations.
“This creates new challenges for the way they manage their finances in later life and for the housing market overall, although the financial sector is moving rapidly to meet their diverse demands.
“Product innovation has extended to later life mortgages, financial advice is improving and specialist lenders are playing a vital role by investing time to assess individual circumstances, with high levels of customer care.
“The report provides many practical and achievable recommendations on how the UK can expand the options for older homeowners and support their financial freedom.
“This will require changing mind-sets and a collective refocus from government and the housing industry towards helping last-time buyers. The effect could have a substantial impact in tackling the wider housing crisis.”
In terms of financial services the report said mortgage lenders should make it easier to ‘port’ mortgages, while it should be easier to switch from one type to another and repay early without having to incur hefty early repayment charges.
The study recommended for there to be a greater flexibility in housing-backed lending to people from their 50s onwards.
It also said housing equity should be earmarked for insurance to cover care costs, so payments for policies can be deferred until the home is sold.
Professor Les Mayhew said: “The UK population is growing and also rapidly ageing thanks to improvements in life expectancy.
“By taking a long view, the research clearly shows the origins of today’s housing crisis and what can be done to tackle it.
“A better alignment of the housing stock with housing needs, along with improved financial incentives, would significantly alleviate housing pressures to the benefit of all.”
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