Making use of home equity: the potential of housing wealth to enhance retirement security / Jorge Bravo (Universidade Nova de Lisboa, Université Paris-Dauphine, MagIC and CEFAGE-UE), Mercedes Ayuso (University of Barcelona), Robert Holzmann (Austrian Academy of Sciences, CEPAR, University of New South Wales, SSRC, University of Malaya, IZA and CESifo) ; IZA Institute of Labor Economics
VerfasserBravo, Jorge Miguel Ventura ; Ayuso, Mercedes ; Holzmann, Robert
KörperschaftForschungsinstitut zur Zukunft der Arbeit
ErschienenBonn, Germany : IZA Institute of Labor Economics, September 2019
Elektronische Ressource
Umfang1 Online-Ressource (31 Seiten) : Diagramme
SerieDiscussion paper ; no. 12656
 Das Dokument ist öffentlich zugänglich im Rahmen des deutschen Urheberrechts.
Making use of home equity: the potential of housing wealth to enhance retirement security [0.4 mb]
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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 households 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.