Homeowners could end up £326,000 wealthier over a 30-year period than people who rent, according to a new report.
The Equity Release Council, which represents the UK equity release sector, has warned of lifelong inequality for those unable to get on to the property ladder as younger generations continue to struggle with building up big enough deposits.
According to its latest report, almost one in three homeowners see their mortgage as being like an investment in their future.
And nearly half of homeowners with a mortgage agree they are able to save more because their loan is cheaper than renting, due to unprecedented low interest rates.
About 40 per cent said they believe having a mortgage in later life is becoming more acceptable and 57 per cent said they are looking at ways to release equity from their properties.
Home ownership is expected to become more critical to families’ financial security and wellbeing in later life, the report found, but those unable to get on the property ladder will face difficulties saving up for a deposit and building up savings for retirement.
The end of final salary pension schemes is a significant factor in this, with the report finding for every £1,000 the average employee earns, they can expect just £150 from a defined contribution scheme, compared with £670 from a defined benefit scheme.
Details were published in a report, Home advantage: intergenerational perspectives on property wealth in later life, which examined trends that have altered the financial landscape for pensions and homeownership over the past three decades.
David Burrowes, chair of the Equity Release Council, said: “Property and pensions form the bedrock of financial security for most people, but the rules of engagement have changed substantially over the last 30 years.
“People are living and working longer with responsibility to fund their later years and will need to think differently about their financial decisions at different life stages.
“For those who manage to buy their own home during their working lives, the extra confidence and flexibility this provides will be even more critical to their financial wellbeing than it is today.
“While today’s homebuyers are borrowing larger sums for longer, they are also building considerable equity which can help meet future needs for themselves and their families.”
He added that future generations expect to receive an inheritance in the form of property or money but many do not expect to receive this until their mid-40s to 60s, significantly later than the typical first-time buyer age.
The report calls for the government to follow up on its pledge to “help generation rent become generation buy” with plans to address the fact that 54 per cent of people who are not yet homeowners feel this goal is “unrealistic”.
Jim Boyd, chief executive of the Equity Release Council, said: “Hopes that younger generations will enjoy greater opportunities over longer lives in good health compared to their parents must be balanced by significantly more complicated financial decisions they face, driven by the realities of elevated property prices and the decline of generous pension schemes.
“The long-term impact of Covid-19, which has amplified social trends and tensions including perceptions of intergenerational inequality, is just one factor that will shape people’s financial experiences over the next 30 years.”
Data from the Office for Budget Responsibility (OBR) has shown that retirees have been some of the biggest beneficiaries from the Covid-19 crisis, making huge savings from being unable to spend on holidays and going out.
A stamp duty holiday through much of the pandemic also helped house prices to grow.
Additional reporting by Press Association