Renting a home during retirement. A growing trend – or a growing problem?

Renting a home during retirement. A growing trend – or a growing problem?Traditionally, paying off the mortgage before beginning retirement has been the aim of many individuals, in order to ease the draining burden of paying off a mortgage during the ‘golden years.’

Yet new analysis of ONS census data shows that one in every four of retired households across England and Wales currently pays rent for their home.

The study, by Prudential, shows that 73% of retirees are renting their home in the boroughs of Hackney and Tower Hamlets within London – the highest proportion in the UK.

Overall, the amount of pensioners renting their home in the capital is 36% – which is just over a third.

Outside of London, Manchester in northern England has the highest percentage of pensioner renters, with an even divide of 50%/50% between renters and homeowners.

Retirement rental hotspots outside of London

The following cities are those with the highest proportion of pensioner renters versus pensioner homeowners:

  1. Manchester (50%)
  2. Kingston upon Hull (47%)
  3. Norwich (45%)
  4. South Tyneside (42%)
  5. Newcastle upon Tyne (41%)

On the other side of the coin, Hampshire’s Fareham clocked in with only 11% of retirees renting, Surreys’ Epsom and Ewell holds only 12%, and East Dorset only 12%.

The rise of renters

With property prices rising the fastest in urban areas, it’s no wonder that in cities such as Liverpool, Manchester and Newcastle it’s an even keel between pensioner homeowners and renters.

It marks the growing trend of retirees who sell their home in order to turn equity into cash to supplement retirement income and pensions.

A different study by Prudential commissioned earlier in 2013 found that the tough economic climate in the UK has played a big part in moving into rented accommodation – with 42% of the retired renters being former homeowners, of which 40% were forced to sell up to pay off debts.

The option to downsize

In certain circumstances, selling the family home can make economic sense.

For example, losing the extra bedrooms you no longer need and moving into a smaller property – especially one in a cheaper, more rural area – will either allow you to lock in your savings (if you are buying a smaller house), or greatly increase your savings in the short term (in you decide to rent).

Both these options mean you have the opportunity to wipe out any debts and loans you have incurred.

With regards to renting during retirement, Prudential expert Stan Russell notes in can work to an individual’s advantage, noting it is a “genuine solution for many.”

This is not only with regards to economics and cash flow. 15% of respondents stated they had sold their home and moved into rented accommodation so they could negate the stress of running and maintaining a household to their landlord.

Of course, there is a grave danger in this – namely that the temporary capital will not last long enough for the entire retirement.

It is a question of balance between the time it will take until a person retires, their current assets, and the expected duration of retirement.

To assess whether moving home – and even renting – may be the best option for you, you should speak to an independent financial advisor with experience in retirement who can map out and calculate all the options for you.

About John Cassidy

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