New findings suggest that those counting on an inheritance to solve their financial problems may need to reconsider their expectations.
According to a study by the estate agency Hamptons, declining rates of homeownership are expected to reduce the number of inheritances that include real estate. Currently, four out of five estates include a property, but this trend is anticipated to slow down, potentially disrupting the flow of wealth between generations. David Fell, lead analyst at Hamptons, warns that people can no longer rely on the sale of a family home to pay off their mortgage or upgrade to a larger property.
The implications of this trend extend beyond individual finances, potentially impacting government tax revenues. Inheritance tax, which is levied on estates, brought in £7.5 billion in the 2023-24 tax year, an increase from £7.1 billion the previous year. However, this revenue stream is likely to decrease in the future.
Hamptons’ research shows that 79.2 percent, or 175,000, of the 221,000 estates with assets in the 2021-22 tax year included a property, marking the highest level on record. Homeownership has significantly increased since the end of World War II. In the 1950s, less than half of those who passed away owned a home, compared to roughly 66 percent of those aged 65 and older today. However, these numbers are expected to level off and eventually decline.
Fell also notes an increase in the number of properties that still had an outstanding mortgage at the time of the owner’s death. Currently, more than 10 percent of homes were still under mortgage, with an average debt of £100,000, up from £65,000 a decade ago. This trend is expected to continue as people are purchasing homes later in life and taking out mortgages with longer repayment terms.
Data from the Bank of England reveals that around one million mortgages taken out in the past three years have repayment terms extending beyond the state pension age of 66, indicating that this issue is likely to grow in the coming years.
