What does the prospect of interest rate rises mean for retirees?

Newspapers are filled with negativity around the prospect of interest rate rises and the potential for the market value of properties to drop. The reality is most homeowners have benefited enormously from the property value explosion in the past couple of years, but in such a confusing landscape, many retirees are asking what it all means for them as they look to the next stage of life.

Many people spend their entire lifetime building equity in their castle so that when they are in retirement they can have the lifestyle they’ve worked hard to enjoy.

Like many suburbs in Melbourne, the property market in Wheelers Hill and surrounding areas has experienced enormous growth. According to realestate.com, based on average sales, the median price for a four-bedroom home in the area is now $1.4 m, which is an increase of about $200,000 compared with prices 12 months ago.

Government census data tells us that the average in the area is 60+ and approximately 86% of people are homeowners. Many of these people have remained in a large home that was once perfect for raising a family, but now they find they no longer need, or want to maintain a such large property. So, the question is how do they unlock the value of their home?

Alternatives such as reverse mortgages are an avenue to access equity, but can be a very expensive exercise. Selling a property at a high point in the market is a smart move, but is a Retirement Village a good financial option?

In most circumstances, after selling a home and buying into at retirement village, buyers will have cash left over. Freeing up these funds can offer retirees the opportunity to travel, enjoy new experiences, and live life to the fullest, but it can also allow them to invest, or top up their super if they choose.

The experience of buying into retirement living varies from village to village and buyers need to ensure the situation and the environment is right for them.

Villages such as Cumberland View offer transparent information around costs and ongoing fees; however, some villages can have hidden fees, so buyers should speak with their accountant, or conveyancer for an objective view and to understand the overall costs.

Importantly, the property market has provided huge growth in value of houses, so the question for retirees is how do you want to make that work for you?  Engaging the right people to provide you with independent advice will help you make the right decision for your circumstances.

This article provides information, not advice. Please seek independent advice from your financial professional as to how this information applies to your personal situation.

Anthony Beauchamp
HTA Finance

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