Downsizing comments wanted

People have been more cautious of borrowing for quite some time due to the yo-yo rates that have been seen over the last 18 months. I think however, people have in fact borrowed more to consolidate certain luxuries that they can't afford due to the rising mortgage rates. Lastly, I think many will now seek to secure their mortgage rates for a little longer due to the sheer scale of rate hikes and uncertainty in the market since early 2023.

The number of homeowners contacting us to discuss their options OTHER THAN downsizing have more than doubled in the first two months of 2024.
Huge numbers are suffering due to the ongoing Cost of Living crisis, however many of these have lived in their proprty for decades and are reluctant to leave a familiar house and neighbourhood. As well as Equity Rlease, we discuss downsizing with each client, however the moving costs, disruption and Stamp Duty associated with moving home make most stay in their home.
A downsizing discussion is an excellent idea, however it should be considered alongside other viable options.

There's definitely some caution in the market. We're noticing less willingness from self-employed buyers to borrow the maximum amount possible. They're looking to keep costs down, and with less competition for properties, negotiating hard on price. Part and part mortgages, where only some of the loan is paid off during the term, thereby reducing the monthly repayment, are also becoming increasingly popular.

As a mortgage adviser working with older clients, we always encourage the client to think about their downsizing plans as an alternative to releasing equity in their homes. Whilst it is an appealing prospect for some, especially if they are able to release funds to supplement retirement income and maybe have a property which entails fewer outgoings, the costs and upheaval for many feels like a step too far. One of the biggest costs for downsizing clients to consder is stamp duty. Many are on fixed incomes and the stamp duty funds may have to come from savings or released equity as downsizing doesn't always mean a significantly cheaper property, just one that is more accessible as mobility decreases or one that is closer to family who may live in a more expensive area. A waiver of stamp duty would make downsizing more palatable for many and would also mean an increase in supply of larger homes coming to market.

We have seen a lot of this kind of activity, people unusually acting cautiously and considering potential scenarios and coming to us to sanity check their scribblings. We find it both encouraging and worrying at the same time, it's a true confirmation of the state of the UK household budgets at the moment. From parents with kids in University for long periods of time downsizing to smaller properties while the studies are being undertaken with a view to go back up the ladder in years to come, to people in shared ownership houses with quite large shares in their properties, 60%, selling and buying a new shared property on a mortgage but at a lower share allowing them to consolidate their debts and lower their bills without increasing their mortgage level. It certainly is a tricky time for homeowners and demonstrates further the need for a decent financial adviser to go through your options and navigate you through times of trouble.

In my observation, there hasn't been a notable trend of people downsizing in the area where I operate. However, there has been a significant increase in customers opting to extend their mortgage terms. This decision is primarily aimed at mitigating the impact of rising mortgage payments due to increasing interest rates. Among those who are remortgaging, the prevailing pattern seems to be sticking to a similar borrowing level without significant increases at the moment.

We recently helped a couple remortgage to a 2-year fixed, and switch the loan to interest only in order to keep their monthly payments manageable on the higher rate. They then intend to use the next two years to plan a move to downsize, research new areas to move to, schools for their children etc. They have a good amount of equity in their home and having bought themselves two years to make such a move they were confident this was a good overall solution for their family.

We have seen an increase with people being more cautious on the level they are buying at. Some have looked at downsizing, but the majority are still looking at going to a bigger property, albeit at a lower budget than what they would have with rates sub 2%. I have had one customer recently change their search criteria from £2m plus to below £1.5m in a different area.