Two in five (39%) adults who are currently renting expect to still be renting when they retire, Equity Release Council (ERC) figures reveal.
The research reveals that 25% of current renters believe they’ll be able to buy a home before retirement.
The average monthly rent in October increased to £1,348 in England, £766 in Wales and £976 in Scotland, over a 12 month period. In England, rent inflation was highest in London and lowest in Yorkshire and the Humber.
In 2023, private renters with a median household income in England spent 34% of their earnings on a rental home on average.
However, in London average rents have consistently accounted for between 40% and 57% of household incomes since 2015, placing greater pressure on renters in the capital.
In October, the average private rent in Great Britain was £1,307 per month. If older renters only receive the full state pension, which is currently £11,502, a retired renter will only have enough money to cover the cost of their rent for eight and a half months of the year.
The ERC’s research shows later life mortgages are increasingly seen as more common (39%) and acceptable (39%) by consumers.
Almost a third (29%) of current renters believe getting a mortgage in later life can be a positive step that provides more financial freedom and flexibility.
However, one of the main drivers holding people back is confusion around what options are available.
Two fifths (43%) of private renters are confused about what mortgages are available to people in later life or retirement.
The findings come from a study of 5,000 UK adults’ financial resources, attitudes and experiences.
ERC chief executive officer Jim Boyd says: “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 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.”
“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.”
Legal & General managing director of retail retirement Lorna Shah adds: “Renting into retirement places an increased burden on people’s later-life budgets. Analysis from Legal & General found that in order to achieve the satisfaction levels of the happiest retirees, the average person, along with their employer, would need to set aside nearly 10% (up from the current 8%) of their qualifying income every month, from the age of 22 until retirement.”
“However, this assumes, as many retirement income calculators do, that the saver owns their own home. Those without property wealth to fall back on could need to contribute even more, up to 21% to cover the higher costs.”
