Retirees are struggling to release equity from their homes by downsizing because of the stamp duty costs, according to Saga and the Council of Mortgage Lenders (CML).

The concern is that these large homes are now being under-utilised. If stamp duty payments for people downsizing were removed it could lead to tens of thousands of family homes being released to the market.

Recent figures from Rightmove point to a shortage of new homes coming on to the market, especially those suitable for families.

Changes in stamp duty needed

The CML says many retirees are struggling to release equity from their home because of stamp duty costs, inflexible lenders and new regulations.

Together with Saga, it is now calling for stamp duty to be either removed or reduced for those wanting to downsize their homes. 

Stephanie McMahon, Head of Research at Strutt & Parker, said: “The changes to SDLT in the 2014 Autumn statement removed the pricing “slabs” which had long been criticised. The vast majority of the UK population benefitted with transaction tax became cheaper (for all sales under £937,500). For retirees, however, capital preservation becomes paramount, and so policy which reduces costs would certainly make buying more palatable.”

Lisa Harris of Saga says seven in 10 over-50s would consider changing their home when they retire but are put off by the costs.

The group wants the Government to introduce a one-off, stamp duty-free move for downsizers.

It is believed this could release around 111,000 family homes onto the market.

Older people ‘stockpiling’ spare rooms

Moray McDonald, CML’s chairman, says just 1% of homeowners aged over 65 moved in the last year.

He says these people are being forced to stockpile spare rooms, when they could be released for families.

The equity that could be released by downsizing could also be passed on to their children and grandchildren to fund a house purchase of their own.

He says the Government has been focusing too much on getting young people on the housing ladder and not enough on helping those at the top take a step down.

He also lays part of the blame with the Mortgage Market Review, as it has made it harder for older people to re-mortgage their homes to fund a move.