Making Use of Home Equity: The Potential of Housing Wealth to Enhance Retirement Security

Jorge Bravo, Mercedes Ayuso and Robert Holzmann

No 12656, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The demographic change underway, declining adequacy levels from traditional pay-as-you-go old-age social security systems, structural reforms in pension schemes and the reduction in the traditional family support have increased the need for additional private savings to cover the old age income gap. In this paper we discuss the necessity, the role and the viability of home equity release schemes in supplementing public and private pensions in an integrated way. We use the latest European data from the Eurosystem Household Finance and Consumption Survey (HFCS) to analyse the household's wealth composition and accumulation process in the euro area. To quantify the size of the housing wealth and its potential to enhance existing and future retirement income, we compute the equity-to-value ratio (ETV) for all countries, estimate the time to loan payoff and compute the amount of home equity that is expected to be released over a 10-year period through regular monthly mortgage payments. We then catalogue and discuss the many alternative options for managing and accessing housing wealth over the life cycle, and highlight the main characteristics, risks, advantages and drawbacks of the two most important market products (home reversion plans and reverse mortgages). Finally, we discuss the main demand-side and supply-side obstacles and challenges to the development of equity release markets and extract some policy implications.

Keywords: equity release schemes; housing wealth; reverse mortgage; homeownership; retirement income; pensions adequacy (search for similar items in EconPapers)
JEL-codes: D1 G1 J1 R2 R3 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2019-09
New Economics Papers: this item is included in nep-age, nep-eec and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://docs.iza.org/dp12656.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp12656

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
library@iza.org

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte (hinte@iza.org).