Downsizing the family home was once the province of empty-nesters. This hasn’t changed, with around 2.3 million Britons over the age of 55 planning on downsizing in the near future.
What is more surprising is the trend towards younger people downsizing, and it’s not just so they have less rooms to clean. Let’s look at why downsizing your home in today’s market is a smart move.
Life Isn’t Getting Cheaper
Compared to the cost of living, 2014 saw Britain’s first real wage rise in six years. Unfortunately, this has not stopped the UK from seeing its lowest standard of living since 2006. Even with the recent reduction in fuel prices, many markets remain unpredictable. Downsizing your home is a prudent way of hedging against potential crises.
Your Home is Worth a Lot… For Now
The spring and summer of 2014 saw a boom in the housing market. This contributed to a 7.2% increase in house prices across Britain and a remarkable 17.7% increase in London.
In real terms, this means you are likely to receive a high price for your home, leaving plenty of money to invest in a smaller property. Bear in mind the time to sell is now, as the market is showing signs of cooling.
Selling your home, renting for a while, and buying a smaller property as the market cools could be wise move if you really want to free up some cash.
Get Your Children on the Property Ladder
The availability of 90% mortgages, combined with the Government’s Help To Buy and Starter Home schemes, may have seen more first time home buyers in years, but the market is still volatile. Downsizing your property to help your children onto the property ladder will help assure their future while leaving them less susceptible to an ever-changing property market.
Increase Your Retirement Fund
Even if you aren’t considering your retirement, the forecast cooling of the housing market means early 2015 is a good year to start. Releasing money tied up in your property, and diversifying your return between a smaller property and other investments will help to protect you in later life. Keeping your eggs in one basket has never been a smart move.
Offset the Forecast Mortgage Increase
Don’t be fooled by the Bank of England’s current decision to keep interest rates low. The Centre for Economics and Business Research (CEBR) is predicting a sudden and sharp rise in interest rates by the end of 2015, resulting in mortgage payment increases of up to £119 annually.
If you’re one of the 49.5% of variable rate mortgagees who has failed to save enough to accommodate this shock, downsizing before the market cools could be your only means of survival.
Reduce Associated Expenses
The obvious benefit to downsizing your home is the immediate reduction in your mortgage. However, associated costs such as maintenance and utilities will also plummet, leaving you with more cash in your pocket and less headaches every time you see a bill.
Start a Property Portfolio
Make the most of the property market by selling your home now, downsizing, and using the remaining funds to purchase an investment property later. With 27% of landlords planning on increasing rents by 3% in 2015, investing in a Buy-To-Let is a good bet.
Buy Your Dream Holiday Home
Most Britons dream of a holiday home, and there’s no reason why you can’t have one. Join the increasing trend toward downsizing and you could put the remaining income into an investment in the sun. Not only will you be diversifying, you’ll have a place to escape or retire to.
Large properties in 2015 are going the way of the stately homes of old. Surveys of those who have already downsized show people are enjoying more free time and disposable income. For all the practical reasons to downsize, there’s one intangible benefit you can’t put a price on – peace of mind.