Three out of ten British homeowners have already considered downsizing
WITH MANY PEOPLE looking at the options to make their money go further and get the most out of the assets they have, moving to a smaller home is something some people might be considering. New research suggests that three out of ten British homeowners have already considered changing their living arrangements to help meet the rising cost of living[1]. While increased costs are affecting people differently across the UK, the research shows that rises to basic household bills are having the greatest impact.
BIGGEST COST OF LIVING IMPACT Rising energy costs (82%) and grocery bills (82%) were called out as having the greatest effect, closely followed by rising fuel prices (72%). For those with a mortgage, only one in three (34%) suggested it rising had been the biggest cost of living impact they faced. With mortgages or rent often being the largest single household expense, finding ways to reduce them could help those feeling the financial squeeze. The research shows three out of ten (33%) have already considered options like downsizing, relocating or cohabiting, with almost one in five (17%) saying downsizing was something they had considered.
CONSIDERED DOWNSIZING OR RELOCATING Those living in Central London were much more likely to have considered downsizing or relocating (32% for both) than the UK average. People in Yorkshire & Humber (12%) were least likely to have thought about downsizing, while those in the North East were least likely to wonder about the prospects of relocation. Though just four in 100 (4%) had gone as far as actually moving to a smaller home to help meet their increasing costs, the idea was not ruled out by many of the respondents. Of those surveyed, nearly two-thirds (60%) said moving to a smaller home to help with the cost of living would be something they might consider.
HOUSE PRICES OF DIFFERENT-SIZED HOMES When thinking about moving to a smaller home, the reduced cost of living (72%) was most commonly named as a benefit of downsizing, with a third (33%) placing it as the number one benefit. The financial benefits of downsizing can be realised through releasing equity by selling a larger home, moving to lower monthly mortgage payments or a combination of both. However, the amount of equity that those surveyed said they might expect to realise, £105,000, could be an underestimate. Based on analysis of house prices of different-sized homes, moving to a home one bedroom smaller would, on average, raise £120,820.
‘PER BEDROOM’ PREMIUM FALLS WITH SMALLER PROPERTIES The average house price of properties of different sizes varies greatly around the UK’s regions and per bedroom depending on the relative size of the home. According to the research findings, homeowners in London with five-bedroom homes would on average secure a four-bedroom home for nearly £370,000 less, also saving around £1,800 per month on mortgage payments. The ‘per bedroom’ premium falls with smaller properties but even moving from a three-bedroom to a two-bedroom home is over £125,000 less, saving more than £600 each month on mortgage repayments.
HIGH-RANKING CONCERNS ABOUT DOWNSIZING The potential savings from downsizing by a single bedroom are present across all regions of the UK, with the greatest being between five and four-bedroom and four and three-bedroom homes. On average, the monthly mortgage saving could be £935 or £809 respectively. On the other side, moving costs were most often cited as one of the main drawbacks of downsizing (39% of people put this in their top three), along with the lack of space for personal belongings (38%). The distance from family and friends (29%) and being in an unfamiliar area (28%) were also high ranking concerns about downsizing.
RELEASING SIGNIFICANT EQUITY FOR A FINANCIAL BUFFER Expectations of how close a smaller home might be also looked to be somewhat ambitious. The average distance people expected to move to find their smaller home was 29 miles. However, any concerns about the remoteness of family and friends might be stretched by the 54-mile average distance moved by those who have already downsized. For those where it is an option, downsizing can lower mortgage costs that could help with the cost of living or release significant equity for a financial buffer. But it’s not without its own challenges. The time it can take to move home, distance from friends and family, and the reduced space can all put a question mark over whether the move to a smaller home could work.
>> WANT TO BUY, MOVE OR IMPROVE YOUR HOME? << If you are considering downsizing and want to discuss options to lower your mortgage costs, for more information, contact Omni Finance – telephone 01424 236903 – email simon.hickman@omnifinance.co.uk
Source data: [1] Research conducted by Halifax – rolling 12 months to July 2022 – 80% LTV, 5.5% – 25yr term, published 16 November 2022
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. BUY TO LET MORTGAGES ARE NOT USUALLY REGULATED BY THE FINANCIAL CONDUCT AUTHORITY. OMNI FINANCE IS AN APPOINTED REPRESENTATIVE OF NEW LEAF DISTRIBUTION LTD WHO ARE AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT AUTHORITY (FCA). FCA NUMBER IS 460421.
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