14 Mar 2016
Author: Stephen Breen
A government report carried out by the Department for Communities and Local Government has revealed a trend in older homeowners. Of the 22.5 million homes in England, 7.4 million are owned outright, and 4.5 million of these are owned by people are aged 65 or older.
In total, 14.3 million homes across the country are held as owner-occupier (with or without a mortgage), although more are held without a mortgage (33%) than with one (30%). The figures differ slightly for London, where there are 4% more homeowners with a mortgage than without one, and it is more common for younger people to own property.
Of the remaining households, 19% (4.3 million) rent privately and 17% (3.9 million) rent from a social landlord. The survey also revealed that the average age for a first time buyer has increased from 31 to 33 in the past ten years, and the number of private renters who expected to buy in the future declined from 61% in 2013/14 to 57% in 2014/15. There has been an increase of 30% in families with dependent children renting compared to ten years ago, with this group now making up 37% of all private renters.
Older people have control of England’s housing market having benefited from strong house price growth, living longer and the boom in home ownership that occurred in the second half of the twentieth century. The profile of first time buyers is changing and even families are now struggling to get a foot on the housing ladder, impacted by the rising house prices, stringent mortgage regulations and few affordable properties on the market. This means that for many renting is their only option, and nearly half of those aged 25-34 now rent privately, in contrast with just 24% ten years ago.
The problems faced by first time buyers come in spite of a wave of government measures to help this group own their own home such as the Government’s Help to Buy Equity Loan, Mortgage Guarantee and Help to Buy ISA. In addition the recent Government measures to make buy-to-let property investment less appealing were also proposed with a view to preventing would-be landlords from snapping up low cost properties more suited to first time buyers, although this may be ill conceived (see ‘Hope for first time buyers’).
Help a first time buyer
Gifting money during your lifetime to help your children or grandchildren buy their first home can be an extremely effective way of minimising any inheritance tax due on your estate. Gifting your assets can also mean they are not used up for long term care fees, should you need support in the future (although complex rules apply here).
Gifts up to £3,000 given in each tax year will not fall into the value of your estate for inheritance tax purposes. Gifts over this amount will also not fall into the value of your estate provided that you survive for seven years after making the gift. Should you not survive for the full seven year period, inheritance tax is due at 40% on gifts made within three years of death and at a tapered rate on gifts made between 3 and 7 years of death.
The rules regarding gifting are complex and we advise that you consult with our Later Life Planning Team to ensure your gifts are made in the most tax efficient way possible.