Downsizing home can release £272,000

cottageDownsizing is the main reason for people selling their home with 43% wanting to reduce bills and a third (37%) using the cash for their retirement.

London is the most lucrative place to downsize, with an average of £272,000 freed up, but UK-wide an average of £97,722 can be raised by downsizing your home.

Almost half (45%) of homeowners planning to sell their property in the next three years say they'd like to downsize, according to Lloyds Bank.

Reasons for trading down

  • 37% want to downsize to support their retirement plans
  • 43% said they wanted to reduce their bills and outgoings
  • 31% said they were looking to free up equity so they could re-invest in something other than property or a pension
  • 12% wanted to invest in a pension
  • 18% said they would give money to their family.

Many of those downsizing have been hard hit by the economy with low interest rates hitting savers hard. Nearly a third (29%) of those considering downsizing are doing so earlier than they expected.

Where to move?

  • 32% of downsizers are looking to move to a detached house
  • 26% to a semi-detached house
  • 45% are looking to move to a bungalow.

More than a retirement option

The young as well as the old are considering downsizing. The survey showed that the average age of those looking to downsize was just 40 years old, with a quarter (26%) of potential downsizers aged just 26 – 35. Another quarter (26%) was aged 36 – 45 and a further quarter (24%) was made up of potential downsizers aged 46 – 55.

Potential sums to be made from downsizing
For those trading down early, the potential amount that can be raised by downsizing from a detached property to a bungalow has risen by 12% (or £10,221) over the past decade; a downsizer today would receive an average of £97,722; compared with £87,501 in 2003.

The potential amount of cash homeowners could raise by downsizing their property from a detached home to a semi detached would have earned an average of £116,474 in 2013; an increase of 13% (£13,910) since 2003.

Regional variations

Buyers downsizing from a detached home to a bungalow in the North saw the largest average increase of 35% (or £20,360), followed by the East Midlands and the North West, which both saw rises of 23% (£13,605 and £17,088 respectively) and the South East (20% or £27,026 – the largest rise in monetary terms).

Downsizers in the capital stand to make the most in monetary terms, with a downsizer in Greater London typically standing to make an average of almost £272,000 from trading down from a detached to a bungalow.

On the other hand, those moving from a detached home to a semi in Scotland saw the largest overall increase in the average amount that could be made, at 22% (or £17,657) over the past decade, followed by the South East and East Anglia (both 17%).

Property turnaround times

According to the report, a third (34%) of homeowners considering downsizing have lived in their current property for between 11 and 20 years and one in five (19%) have lived in their current property for between 21 and 30 years.

Many are choosing to move a lot sooner: 23% have only lived in their property for between six and 10 years and 11% have lived in their property for just five years or even fewer.

Marc Page, mortgages director, Lloyds Bank, said: "There is no question that downsizers have a key role to play in the housing market, especially in a climate where it's not just those looking to retire who want to free up equity from their home by moving somewhere smaller.

"Many families view downsizing as a sensible way to lower their bills, help out their children or free up funds for retirement. However, selling your home is not a decision to be taken lightly. It's important to give careful consideration to whether trading down is the best solution for you and to seek professional advice first."