National Association Of Property Buyers: “We’d welcome a stamp duty cut for pensioners selling their own home to downsize.”

PENSIONERS should be offered tax-breaks to downsize their homes, a leading property group says. 

The National Association of Property Buyers says the move would also help reduce the rising numbers of people tempted to utilise equity release.

Jonathan Rolande, spokesman for the National  Association of Property Buyers, said: “We’d welcome a stamp duty cut for pensioners selling their own home to downsize. It would allow them to move without the penalty of high SDLT and would certainly encourage more to do so. Currently a pensioner selling a family home at £700,000 to buy at £500,000 would face a £15,000 stamp duty bill and with other costs such as estate agent and solicitors a move downward is going to cost them nearly £30,000. This is a figure many simply cannot bring themselves to pay when leaving a much loved family home. Government receipts from stamp duty have more than doubled in the last ten years so there is certainly capacity to offer targeted reductions to help free up stock.”

The idea comes as new research revealed how the number of homeowners releasing equity from their property between January and March rose by over 20 percent to a new quarterly high of 23,395. 

The Equity Release Council says although the number of those using equity release products had not reached the same level as before the pandemic, the average loan size grew six per cent in the 12 months ending March 2022.

A total of 150,653 new and existing customers have used equity release since March 2020, compared with 171,586 over the previous two-year period.

Meanwhile, total lending was £1.53bn between January and March, up from £1.34bn in during the last three months of 2021.

The average new loan size grew 6 per cent year on year, matching the latest inflation figure and surpassing the 11 per cent annual UK house-price rise which added £27,000 to the average home.

Mr  Rolande, who is also the co-founder of House Buy Fast, said the Government needs to think “outside the box” to come up with solutions to the growing housing crisis and confirmed equity release was rising in popularity. 

“More  and more people appear to be considering equity release,” he continued. “This is understandable as, on the face of it, these schemes allow homeowners aged at least 55 to access the equity (or cash) in their property. 

“However there are significant drawbacks. Equity release can be expensive and can be significantly more expensive than mortgages. The average interest rates on lifetime mortgages are approximately 4%, with the lowest rates nearer to 3%.  Interest is also due on the debt and by opting not to make voluntary payments to reduce the debt, the interest compounds.  Several fees will also be payable in addition to the interest. Lifetime mortgages are intended to last the homeowner’s lifetime and so selling the property with an equity release plan can be eye-watering in terms of cost. Not only will the debt need to be repaid, but early repayment costs will also be incurred which can be considerable. 

With a home reversion plan, the homeowner will no longer own all the equity in their home. With a lifetime mortgage, if house prices fall then the homeowner will be impacted. 

Equity releasing will also affect any other benefits that are being claimed, such as pension credit and universal credit etc.” 

“One thing I can’t stress enough is that equity release should always be a last resort move. It is a useful and valuable product to many, allowing the chance to live a better life or fund a property, business or dream holiday. But once it’s gone, it’s gone and further borrowing will erode future gifts or inheritance.”

Last week the NAPB warned that Rishi Sunak and Liz Truss need to put tackling the housing crisis at “the top of their list” if they become Prime Minister. 

In a statement they said:”Over the course of the last couple of weeks we’ve heard very little said about how either Liz Truss or Rishi Sunak will tackle the housing crisis. 

“This is deeply alarming because right now a whole generation of young people are facing the reality of not being able to rent a property let alone own one.

“This comes down to one issue and one issue alone – supply. 

“In all areas of the country we are experiencing a lack of both affordable and new homes that the market desperately needs. 

“It’s vital that whoever wins this race to become Prime Minister sets out a vision on how we tackle this issue. 

“What’s more we need a Housing Minister who remains in post for more than five mintues and who can get on with the job of delivering.”