To be a homeowner in your mid-50s is, many believe, to have won first prize in the lottery of life. You joined the housing ladder just as the old “mortgage queue” was abolished in the mid-1980s, enjoyed regular pay rises that eroded the real value of your home loan and banked big capital gains as you cashed in each property and moved to the next.
You are – allegedly – sitting pretty, give or take the bug-eyed envy of the younger generation who are shut out of the housing market.
But what of those who were in their 50s in the 1950s? Were they basking in the glow of accumulated property wealth?
We hear so much about the relative wealth of the over-50s today and how their expectations have changed over the decades, but we thought it would be worth looking at the similarities between then and now to see what we have to learn from those times.
Home ownership then and now
The first big difference is the much smaller numbers involved in home ownership. In 1953, just 32% of all households were in owner-occupation. This had risen to 42% by the start of the sixties, with 34% in private rental accommodation and the balance in social housing .
Despite the rise of 10 percentage points over the decade, home ownership was still a minority pursuit. This had a financial impact in a number of ways:
- The chances of sitting on property-related wealth of any sort were obviously much smaller.
- This leads to a second financial impact, involving the savings and investment culture of the time. Given that one’s house was not the main financial asset, perhaps it’s not surprising that share ownership was much more widely spread among the population as a whole, compared with today – where most equity investments are held by institutions. In 1963, 54% of equities were privately held, against just 10.7% in 2012 .
- With no need to find a buyer or participate in a housing chain, moving from one rental property to another was straightforward. The social impact of this increased freedom and mobility was prevalent in the 1950s.
By contrast, today’s mid-50s homeowner will have a bigger proportion of their accumulated wealth tied up in their house, will be considerably less likely to own a traditional portfolio of shares, and will find the whole business of moving house relatively complicated, even when things go smoothly.
Why does this matter?
The tying up of so much household wealth in home ownership gives those in their 50s today a stake in the sort of roaring house price inflation that did not exist in the 1950s, and this may make us feel as if we are better off – regardless of the underlying reality.
In the 1950s, an average house cost £1,891, increasing by a modest 10% to £2,077 by the end of the decade, with most of that rise occurring in the later years following a period of rising consumer prosperity.
By contrast, there was a 100%-plus increase between 2000 and 2010, notwithstanding the price slide at the end of the 10-year period .
Happy days you may think. But this dependency makes our 50s generation much more vulnerable to negative fluctuations in the housing market, both in terms of a tumble in the actual property value and in realising the asset when market activity dries up.
It is not an ideal solution for funding unexpected financial needs such as lifestyle changes, demands from growing children or, indeed, the real cost of being older for longer. Nor can it be relied upon to provide a legacy for the future of our loved ones…
The next generation
This whole issue of today’s 50s generation having a vested interest in rising prices leads on to the question of where the next generation, who are priced out of owner-occupation, are going to live. In many cases, the answer seems to be that their parents will be expected to provide accommodation.
Should you imagine this to be a far cry from the 1950s, the figures may come as a surprise. The percentage of households containing adult – defined as post-16 – children has actually fallen since the end of the 1950s, from 10% to 6% (where the parents are together), and from 4% to 3% (in lone-parent households) .
But few of those stay-at-homes would have been university students or frustrated job-seekers. Almost all would have been expected to get a job in the booming labour market and pay housekeeping to their parents, at the same time creating a nest egg for their own journey into marriage, when they would naturally want to set up a home of their own.
Why do these differences matter?
In short, we have chosen to put our wealth into fixed assets rather than transferable shares, and in doing so have created an ideal situation for our older children to live at home for longer. A big tick for family bonding, but a factor that may prevent the current over 50s generation from realising part of their chief asset by downsizing, freeing up cash to fuel their lifestyle expectancies into their retirement.
Equity release – which would have been frowned on in the 1950s as a type of “second mortgage”, a disreputable financial instrument implying someone with debt problems – has been heralded as a way of accessing funds to fuel unexpected lifestyle expenses. It also has the advantage of allowing us to remain in our property.
But the interest rates are punitive, and it is not a route to be advised for those who have other choices. It is also wise to remember that any way of using property as a temporary cash fix will eat into your legacy – and therefore reduce the amount you will pass on to your nearest and dearest.
Facing such a situation, today’s 50s generation may be well-advised to do something that would have been familiar to their 1950s predecessors, which is to put some money into a non-property asset.
An over 50s life insurance policy is one option to consider in such a situation. Invest in this type of plan and you – and your loved ones – may well be able to “have it all”.
1 Office for National Statistics (April, 2013), “A Century of Home Ownership and Renting in England and Wales” [online]. Available from www.ons.gov.uk
2 Office for National Statistics (2012), “Ownership of UK Quoted Shares” [online]. Available from www.ons.gov.uk
3 Just Us Financial Solutions, “Property prices graph” [online]. Available from www.jufs.co.uk
4 Office for National Statistics (2012), “Measuring National Well-being – Households and Families” [online]. Available from www.ons.gov.uk
Note: Whilst we take care to ensure Hub content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decisions. OneFamily do not provide advice so it may be worth speaking to an independent financial advisor about your own circumstances.