Downsizing can help free up homes aimed at second steppers which can then inevitably help First time buyers. The effects of downsizing can trickle down to free up homes desperately needed. Ways of encouraging people to downsize are needed through government reform and building more homes to meet demand. Home ownership for under-35s is just 27% compared with 65% in the 1990s. The main issue locking many First-time buyers out of the market is soaring house prices which are now 7.8 times average earnings in England and Wales.
There are many benefits for those looking to downsize as it could release extra money needed for retirement, reduce costs and less maintenance required. The need to encourage downsizing is evident, however the situation is more complex than initially thought for many. If your client does not own their home outright and requires a mortgage, this could be problematic. Mainstream lenders are reluctant to lend on mortgages to over-65s, however at Smart Money we have access to specialist lenders who could lend up to age 80. The main issue for those who have retired is the strict affordability rules introduced back in 2014 which means lenders now look at your client’s income and outgoings which may not include pension income.
The main factor stopping clients downsizing is due to the moving costs involved. An average house worth £229,431 including stamp duty, the costs could add up to £8,543 and this is before you have considered any costs the new house may incur. This topic has been featured in the news recently with discussion regarding stamp duty costs to stimulate second steppers by abolishing stamp duty for properties under £500K. However, moving costs have also been a prohibitive factor for this category.
To conclude downsizing could help the property market in the long-term however the feasibility will not be suitable for everyone. Downsizing needs to be encouraged to ensure there are homes available for second steppers to enable First time buyers to get on the property ladder.
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