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Taxing equity release would not solve issues for older homeowners – Rozario

by: Andrea Rozario, chief corporate officer at Bower Retirement
  • 10/09/2018
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Taxing equity release would not solve issues for older homeowners – Rozario
Should equity release be taxed to boost the downsizing market? This was a question I stumbled across recently.


It is an interesting proposal, one that happened to come from an estate agent website, and one that at least deserves to be looked at.

My answer? No, it should not.

But that’s not to say that the downsizing market shouldn’t be assisted, this is more about how and why help is required.

Equity release versus downsizing is a debate older homeowners have up and down the country all the time.

Do we sell up and buy somewhere smaller, or do we stay put and look at options like a lifetime mortgage?

There is no correct answer. Each case has to be judged on its own merits, and I would never say that equity release is always the better option – it clearly depends on the case-by-case circumstances.


Two reasons

But surely the answer to less people downsizing is to look at the issues people claim are stopping them from moving?

These are always lack of suitable housing and the cost.

Taxing equity release will in no way solve the fact that there is a real dearth of retirement or suitable housing available for retirees to downsize into.

Lack of suitable housing affects both young and old, and simply taxing an emerging market like equity release, one that is adding more to our economy every single year, will barely make a dent.

Second, the cost of things like stamp duty and general moving costs often run into tens of thousands, so how will taxing equity release help this?

People often choose to access their equity via a lifetime mortgage because of these costs, not to mention the emotional cost, so how will making equity release more expensive help them in any way?

If anything, taxing equity release will just heap more financial pain on people who deserve to have the retirement they want or are in desperate need of the financial relief equity release can bring.


Make it easier

Overall, this is about choice.

The choice homeowners deserve to be able to make between downsizing and equity release.

Instead of just taxing one of the options, let’s make downsizing easier, more affordable and actually possible.

In a perfect world both equity release and downsizing will be attractive options, as both can deliver the means to having a comfortable retirement.

They are not mutually exclusive and for some taking equity release is an option that actually enables them to move into more suitable housing.

Essentially both need to be considered along with all other options but clearly laying out what those options are can be fraught with difficulty, this is why advice is still essential for this sector.



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