What determines UK housing equity withdrawal in later life?

Abstract

The UK government has encouraged the role of the home as a welfare asset especially among the elderly. Although UK pensioners express a desire to use their homes to support their retirement, few actually downsize or borrow against the value of their home using an equity release product. In this paper, we examine housing equity withdrawal behaviour by analysing the cost and benefits of housing equity withdrawal, variations in financial behaviours and attitudes to homeownership along with a consideration of regional effects. Using the UK Wealth and Assets Survey, we find that quantifying the likely amount released and transaction costs explains many of the patterns we observe in the data. Our empirical analysis helps explain the low level of housing equity withdrawal, regional variations in this activity and the choice between downsizing and equity release. We also show that releasing housing wealth would double household private pension wealth in the South of England and boost the regional economy by 30% in Wales, the South East and South West. Current demand and supply developments will likely expand this market but the trade-offs made at both household and societal level are not fully understood.