Downsizing Dominates And Slows Down The Property Market
Recent research shows that it is not just the older generation who are looking to downsize and live mortgage free, and this is having a detrimental effect on the UK property market…
Traditionally, those looking to downsize are people in their late 50s or 60s who are nearing retirement age and are looking to supplement their pension by freeing up the cash locked in their property and pay off their mortgage to significantly reduce their outgoings. However, recent research carried out by Lloyds TSB suggests that it is not just the older generation of homeowners who are currently downsizing to live mortgage free.
According to a recent Lloyds TSB report 59% of people want to trade in their property and move to a smaller one, and one fifth of those are downsizing early, with financial reasons being their primary concern. The cost of mortgage repayments remain very high and the extra costs of remortgaging means it isn’t always worthwhile finding better mortgage rates. The ever-increasing cost of living in the current economic climate is a cause of stress and worry for a lot of homeowners, with fuel prices always increasing and the weekly shop costing more each time, many families are feeling the pinch and moving to smaller home is one way to significantly decrease the household outgoings.
Research by Rightmove last year found that 40% of people who were planning to sell in 2012 were driven by a desire to downsize. However, the same research shows that only 25% of people selling are looking to move up the property ladder. A healthy property market is dependent on buyers with the ability to trade up; this is being prevented due to restrictions on mortgage lending and the increase in mortgage interest rates. Homeowners are not able to secure the funding to buy a larger home and in a lot of cases they are struggling to afford the home they have.
Those homeowners who are downsizing for financial reasons will have to significantly reduce their asking prices in order to achieve a sale, as the few buyers who are up sizing will drive the market and fierce completion will drive prices down. Those who are not in a hurry to sell may be able to command a higher price for their property, but it will mean sitting on the market for a lengthy period of time. Market analysts suggest that the property market is set to remain slow for the foreseeable future, until the banks loosen their lending restrictions and more homeowners are able to upsize. Until that point downsizers, who are dominating the property market, will struggle to sell on the open market and may need to consider alternative routes, such as National Homebuyers, to sell their property.
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