One in four people plan to use their home to fund the cost of care
Almost a quarter, some 24%, of unretired people would rather unlock equity from their property than use their pension pot to pay for care costs in later life, new research suggests.
And with fewer people expecting to use their pension rather than their property to fund care costs, down 5% from 2016 to 32% in 2019. The figures indicate a growing demand for using property to fund the cost of care.
The report from Canada Life also reveals a 6% increase in the number of people who don’t know how they would pay for any future long term care needs at 24% compared to 18% in 2016.
Additional analysis by Canada Life also found there was £382 billion worth of equity contained within UK homes by the end of the second quarter of 2019. This represents a significant trove of wealth that some home owners aged 55 and over can draw on to ease the financial burden of later life care.
‘With the future of long term care in the UK still not clear, people who view their wealth holistically are increasing their ability to fund later life care options,’ said Alice Watson, head of marketing and communications at Canada Life Home Finance.
‘These findings are a real vote of confidence in the home finance industry. Consumers are clearly attracted to the flexibility and security offered by later life mortgages,’ she added.
The research also shows that 40% of people think they are likely to release cash from their property in the future. In support of this finding, the latest figures from the Equity Release Council found that there was a 23% year on year increase in customer numbers in the second half of 2018.
Meanwhile, Canada Life’s research also reveals that more people want to continue living in their current property as they get older, rising three percentage points to 85%. It suggests that one of the key benefits of lifetime mortgages, an equity release product, is that it gives people access to the wealth stored in their home and the freedom to fund care solutions while staying in their home.
Of the available options, some people might use lifetime mortgages to pay for residential care while a loved one stays at home, or make changes to their home to equip it with the necessary provisions that enable them to stay there safely.
Alternatively, for those who need to move into a care home, using a later life buy to let mortgage could be an option that would help cover the cost of care fees.
‘We know how much people value being able to live in the comfort and familiarity of their home. When care provision is in question, the disruption and emotion of someone having to leave their home is best avoided if at all possible. With lifetime mortgages, home owners can age in place, while accessing the cash that will allow them to fund care solutions for them or their loved ones,’ Watson explained.
‘These findings are significant because they reflect the views of those soon to enter retirement, many of whom will be contemplating some of the challenges later life may bring. It is really important that people speak to an independent financial adviser when deciding whether to use equity release to pay for care costs,’ she added.