Housing wealth can alleviate the impending elderly care crisis
The elderly care sector is facing a financial crisis. However, David Forsdyke, our Later Life Finance expert, explains how housing wealth can help close the gap in funding.
In fewer than ten years the elderly care sector will reach a tipping point when, unless the government steps in, many older people won’t get the quality of care they need.
This is the central finding of a new report by Irwin Mitchell and the Centre for Economics and Business Research, which identifies 2029 as the point of no return due to a severe lack of funding and under capacity.
Elderly care, and how it can be paid for, is one of the most pressing questions presented by the UK’s ageing population. These seismic demographic shifts mean that more people will need elderly care in the future, and they will need it for longer.
The average worker would need to increase their monthly savings by an eye-watering £575 a month in order to fund a moderate retirement, according to the report, though even a small increase in savings could make an enormous difference. Meanwhile only those with less than £23,250 in savings or assets qualify for support for paying for care from local authorities – a number that has been frozen since 2011.
It’s clear the problem requires an innovative approach and Equity Release presents an effective way of alleviating pressures on homeowners that wish to pay for care but don’t have the liquid assets to do so.
Those aged 65+ hold an enormous £1.8 trillion in housing wealth, according to Knight Frank Finance research. That climbs to £2.9 trillion for those aged 55+.
There are already methods available to homeowners that wish to use a proportion of that wealth to pay for care, such as drawdown lifetime mortgages – currently the most popular method of Equity Release – or lump sum products.
We would argue an even more tailored approach could be offered by lenders, specifically aimed at paying for care. One method would be to make care funding a feature of a lifetime mortgage, whereby a care cost clause could be triggered in the event it became necessary.
However the issue is addressed, as 2029 draws nearer we at Knight Frank Finance anticipate housing wealth will play an increasingly important role in bridging the funding gap in elderly care. If you’d like to discuss Equity Release, or to simply reassess your borrowing, speak to Knight Frank Finance.
David Forsdyke has been at the forefront of the Equity Release market for 15 years, including 6 years with the industry regulator (the FCA) and two years as a member of the Equity Release Council’s Standards Board. David leads the Later Life Team at Knight Frank Finance. You can contact us on 020 7268 2580 or visit our Borrowing Into Retirement pages.