The Guardian - Views on downsizing

Downsizing may not be the best solution for escalating mortgage costs, considering factors like market conditions affecting property sale prices and associated transaction expenses. Emotional ties and moving disruptions can alsoffset downsizing benefits. It might not address the root cause of mortgage increases, necessitating a comprehensive financial evaluation and exploration of alternatives like refinancing or additional income sources. Renting out a room is a practical alternative, offering advantages such as supplemental income, flexibility without major lifestyle changes, optimal asset utilisation, a temporary financial solution, and shared expenses with a tenant. However, potential implications like legal responsibilities, privacy concerns, and lifestyle adjustments should be carefully weighed. Local regulations and homeowners association rules may affect the ability to rent out a room, requiring thorough research and compliance assurance before considering this option.

Personally I've not actually came across any clients who have been forced to downsize due to rising mortgage costs, however I have had to assist a lot of clients with extending mortgage terms, sometimes beyond retirement age if appropriate, in order to have a mortgage payment that is manageable. The majority of these people see this as a temporary measure, with views to reduce the term back down when rates hopefully come back down.

Downsizing is certainly one way to manage your mortgage costs and, for some people, it may fall at just the right time for them. May be their children have grown up and left home, so the increase in mortgage repayments has hit at the same moment they were thinking of a smaller home anyway. For most people it is a question of priorities; by reducing the size and cost of their home it allows them to maintain the other aspects of their lives they value - travel, cars, socializing, private education for their children, whatever it may be. For others, they will priotise their home and it will be the reverse, they will forgo the nice holidays, cars and revisit the value of private schooling, to keep their current property. Neither is right or wrong, it is purely down to personal preference. It may be that a chat with a mortgage professional could allow a compromise of these aspects; extending your repayment term or securing the right rate may allow you to better balance these elements.

I am yet to have any clients that have been forced to downsize. My client base is relatively lucky that they are mainly northern based and so in relative terms their mortgages are smaller and increase to payment not as significant as those further south and in London. That being said however my clients are still now having to explore alternative means of maintaining affordability such as term extensions which unfortunately is just kicking the can down the road and ultimately will lead to paying potentially thousands more in interest.

Since October '23 the number of enquiries received regarding downsizing has increased twofold. This has been led by clients coming out of fixed deals and being faced with a monthly payment they are unable to afford. Although downsizing frequently alleviates the financial strain, given the persistently high interest rates and property prices, clients often find the relief from downsizing less substantial than anticipated.

Downsizing isn't the only option, but is worth considering as long as there is a hungry market for your existing property. There are more considerations above costs of course. If you're living close to family members, will you have to move away to find something that's affordable? That can be a deal breaker if you're someone who needs care or has carer responsibilities. Renting a room is something worth looking at, but not without getting the right advice and ensuring you can live with a 'stranger' in your home and are willing to make changes to accommodate that. Living with family members (or having the kids move back in) might be a solution, but unless you're close it can be fraught with challenges. In all cases it's worth looking at the upsides and downsides and getting independent guidance.

Downsizing is a positive trend that forms a necessary part of the property cycle and should be encouraged.

Older people, widows and couples left with big empty houses after their children fly the nest should be encouraged to down size to smaller, often more suitable to the physical needs more prominent at the latter stages of life.

The older, larger properties they vacate are often sold below market value as they require some updating and modernisation. The saving can often increase affordability and options for young, growing families to buy and regenerate the big family house over time.

However, people being forced to downsize into inadequate accomodation is not a good thing at all. The Government must step in and offer short term solutions to allow people to manage the sharp increase in payments over a longer period of time.

Nobody should be forced to sell their home due to the mortgage rate tsunami finaly hitting the shore after the interest rate earthquake of 2022.

Downsizing as a solution to a financial problem is worthy of consideration, but doesn’t need to be a knee-jerk reaction. Younger people facing budgetary issues should speak to their lender first. They can provide help which could be enough to get over an immediate problem. Downsizing is a back up if a longer term solution is needed. Older people often see downsizing as the only option due to their age, but Lifetime Mortgage options have become increasingly flexible, so older people may be well advised to consider some form of later life lending which allows them to stay in their own home and avoid the upheaval that downsizing may bring. Stamp Duty can be a deterrent to downsizing as can costs such as legal fees and, potentially, Early Redemption Charges on current mortgages. The Stamp Duty issue in particular has been raised, with various bodies calling for its reduction or removal for downsizers - particularly “last time buyers,” so it’s wise to consider all options wherever possible.