Locked out: two in five expect to rent in retirement as confusion clouds options

Two in five adults currently renting expect to still be paying rent in retirement, highlighting a major risk to their later life financial security.

Key points from analysis:

• • 39% of current renters believe they will still be renting in retirement, with only 25% expecting they will be able to get on the property ladder
  • Private renters in England now spend an average of 34% of their income on housing, with London renters hit hardest, spending up to 57%
  • In October 2024, average private monthly rents in Great Britain increased by 8.7% annually to £1,307
  • The state pension would only give retired renters enough money to pay rent for 8.5 months, based on the average private rent in England in October (£1,348)
  • 43% of renters are confused about later life mortgages, with the risk that they overlook options to get a foothold on the property ladder later in life

Two in five adults who are currently renting (39%) expect to still be renting when they retire, highlighting a major risk to their later life financial security if millions are left to fund housing costs from their pension savings.

The findings come from a study of 5,000 UK adults’ financial resources, attitudes and experiences by the Equity Release Council (the Council), including the role of property as a foundation of financial security.

The research reveals just a quarter (25%) of current renters believe they’ll be able to buy a home before retirement. It leaves a significant majority of the renter population facing the uncertainty of long-term renting and the prospect of having to adapt their retirement plans as a result.

Without the stability and security of homeownership, many retirees will continue to face significant financial strain, as private rents continue to rise faster than incomes in many areas across the UK. 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.

The risks of renting into retirement include the potential lack of stability it offers compared to homeownership. Renters may face unexpected rent increases or may need to move out if their rental property is sold or repurposed.

The added financial strain and stress of finding new accommodation at short notice can be particularly acute for older age groups who are increasingly likely to be managing health conditions in later life.

Rising rents consume household income

In 2023, private renters with a median household income in England spent 34% of their earnings on a rental home on average. In London, however, 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 £1,307 per month. If older renters only receive the full state pension, currently £11,502, a retired renter will only have enough money to cover the cost of their rent for 8.5 months of the year. The latest Retirement Living Standards suggest that a single retiree needs an annual income of £14,400 to maintain a ‘minimum’ quality of life, or £15,700 in London. However, these figures assume people are mortgage and rent free.

While those on low incomes with low savings are sometimes eligible for housing benefit payments to cover the cost of rent, the Pensions & Lifetime Savings Association acknowledges that an increasing number of older people will face extra housing costs in later life, including rental costs or mortgage payments.

Later life mortgages offer a step up onto the housing ladder

The Council’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.

As well as allowing existing homeowners to access the equity in their homes, lifetime mortgages and retirement interest-only (RIO) mortgages can also be used to fund house purchases. Both products give older renters a way to access the property ladder if they have sufficient funds for a large deposit – for example, from an inheritance or the sale of a previous property.

Standard lifetime mortgages allow customers to make ongoing repayments to manage their borrowing, but these are typically not mandated so there are no affordability requirements. Council standards also guarantee customers the right to remain in their home for life, providing financial certainty and stability at a crucial stage of life.

Jim Boyd, CEO of the Equity Release Council, comments:

“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.”

Kindly shared by Equity Release Council