Home inheritance a thing of the past

FOR decades, inheriting a property has been one of the surest routes to financial security, thanks to soaring house prices.

But anyone hoping for a legacy to remedy their money troubles is being warned to scale back their expectations.

A study from the estate agency Hamptons reveals that falling rates of home-ownership will reduce the number of estates that include a home. Currently, property forms part of four out of five estates. This will slow the flow of wealth through the generations, according to David Fell, lead analyst at Hamptons.

It means people can no longer bank on the proceeds of their parents’ or grandparents’ home to pay off their mortgage or trade up to a bigger property.

The trend will also have an impact on the Exchequer by lowering tax revenues. Inheritance tax, charged on estates, netted £7.5billion in the 2023-24 tax year, up from £7.1 billion in the previous year, but this is likely to drop in future. The Hamptons research reveals that 79.2 per cent or 175,000 of the 221,000 estates containing assets in the 2021-22 tax year held a property.

This is the highest on record. Home-ownership has surged since the end of the Second World War. In the 1950s, fewer than a half of those who died owned a home, compared with about 66 per cent of those aged 65 or over who have a home of their own today.

But those figures are set to plateau and decline.

Fell also highlights the rising number of properties that were still mortgaged at the time of the owner’s death.

More than 10 per cent of homes still had a loan outstanding with an average £100,000 owed, up from £65,000 a decade ago.

This trend for older people to have large home loans is likely to grow. People are climbing on to the housing ladder later in life and taking out mortgages with longer terms.

Bank of England data shows that as many as a million mortgages taken out over the past three years have end dates beyond the state pension age of 66.

‘Slow flow of wealth through generations’