PROPTECH-X ‘Proptech & Property News’: Downsizing due to cost of living crisis | PWC divorces and mortgages research

Why the cost of heating a home is forcing many to downsize

PRESS RELEASE: Rising numbers of homeowners are looking to downsize so they can save money on heating, a property group has revealed. 

The National Association of Property Buyers (NAPB) said the soaring price of domestic bills coupled with the cost-of-living crisis is leading many to put their homes up for sale. 

Jonathan Rolande, a spokesman for the NAPB, said: “In the last few months we’ve noticed a rise in activity linked to sellers saying the cost of heating larger homes is leading to them downsizing.

Country houses, particularly those that rely on oil for heating are among the worst hit. The average price of oil last year was 82% higher than it was in 2021. The price has fallen lately but many struggled either to pay, or to keep their property sufficiently warm.”

Many city dwellers moved out to the countryside during the pandemic in search of larger houses with bigger gardens, in what estate agents called the “race for space”.

Many others in large houses are “empty nesters”.

However, the surge in gas and electricity prices has led to energy bills roughly doubling over the past 12 months.

A household with typical usage would have paid about £1,277 a year last winter, but that has risen to £2,500 a year this winter, even with government subsidies.

Households with higher usage will pay much more as caps on tariffs relate to the unit rate, not the absolute bill.

But Mr Rolande said there are some upsides to the situation. 

He continued: “Whilst it is a great pity many will end up leaving a cherished family home, the cost of living crisis is leading to the release of larger, under-occupied property back on to the market, that might otherwise not be sold. This gives a more opportunity to younger, family buyers to purchase their ideal home.

“Many potential sellers are however being deterred by the eye-watering costs of a move down the ladder.

 “A single pensioner selling a long-occupied family home for £1m and re-buying at £750,000 will face fees and costs of nearly £50,000.

 “Many decide to remain once they realise that costs would be so high. After all £50,000 would pay for a lot of heating.”

Mr Rolande said one solution was to reduce stamp duty for pensioners looking to move.

He added: “We’ve long said at the NAPB that reducing this for pensioners would encourage more to move, free up space and help older people to live in more comfortable homes. It’s something I hope the government looks at in the months ahead.”

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Mortgage Matters When Getting Divorced

PRESS RELEASE: Following the introduction of “no-fault” divorces in April 2022, PWC has projected that the divorce rate in England and Wales will shoot up by 23% during 2023. It will be the biggest spike in the divorce rate in more than 50 years.

However, research by Stowe Family Law has found that many of those who are considering divorce may not be able to do so. According to the firm’s latest survey, more than a third of couples who were considering divorce will stay together due to the cost-of-living crisis. 

The finding is echoed by research from Moneyfarm, which shows that nearly 30% of couples are trapped in their marriages as the cost of starting over as a single person is simply too great.

Couples who do decide to divorce – and can afford to do so – often face tough decisions around properties and mortgages. For those looking to buy homes on their own as a result of divorce, property finance specialist Anderson Harris has some sound advice.

“Many people make assumptions when getting divorced about what they will be able to afford in mortgage terms. However, that decision lies with the lender. As such, it’s essential to start speaking to an independent mortgage advisor as soon as possible, either before divorce proceedings begin or as early as feasible during them.”

Jessica Burton, Director, Anderson Harris

As with all mortgage applications, lenders will closely scrutinise income and outgoings. Single life tends to be more expensive than married life, with nobody to share the cost of utility bills and other expenses. It can also impact income for parents who can no longer work so many hours due to changing childcare arrangements.

“It is often not as easy to get a mortgage on your own as you might imagine. Understanding your sole capacity is essential, as is being realistic about the cost of purchasing a property that will work for your new family setup in the location you need. There are also all the costs of purchasing a property and of moving house to factor into your plans.”

 Jessica Burton, Director, Anderson Harris

For couples who own a home together, clarity over how much equity could be available as a deposit or to cover setup costs is important. Any benefits or maintenance payments that could be used to support a mortgage should also be considered.

In addition to its emotional and financial toll, divorce also comes with plenty of paperwork. All divorce cases that go to court now require a Mortgage Capacity Report during divorce proceedings that include the division of assets. These detailed reports will cover the level of mortgage that an individual is likely to be able to afford after their divorce.

“A Mortgage Capacity Report helps to understand each party’s respective borrowing capacity. The parties need to jointly – where possible – obtain the report in advance of the first hearing. As such, we have been busy working with divorce lawyers to provide these reports in a timely fashion, to help divorce proceedings progress.”

Jessica Burton, Director, Anderson Harris

Couples with existing mortgages may need to account for early repayment charges before they can go their separate ways. And for older couples, the added complexity of lenders’ upper age limits on mortgage products may also be a factor.

“The mortgage-related elements of divorce can be stressful but finding an advisor that you trust and making clear, financially sound plans for your future can help take the pressure off somewhat.”

Jessica Burton, Director, Anderson Harris

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Proptech and Property News in association with Estate Agent Networking.