How the emergence of ‘rightsizers’ is driving some specialist brokers
Borrowers are turning to bridging and equity release as they seek solutions to the challenge of ‘rightsizing’.
Rising house prices and a shortage of available property is being blamed for a rise in the number of dissatisfied homeowners.
Nearly a third of people aged over 55 said they felt their home was either too big, too small, or would not be the right size for them as they got older.
Paragon Bank’s report, ‘The Rightsizing Challenge’ surveyed over 2,000 homeowners age 55 or over. It found that 33 per cent would like to move to a more suitable-sized property but six in 10, or 61 per cent, said a lack of suitable properties was the main obstacle.
With limited housing stock, older buyers are seeking alternative ways of making sure their property meets their evolving needs, and many are turning to specialist brokers.
Jason Berry, group sales and marketing director, Crystal Specialist Finance said the lender had noted how the fall in the number of older borrowers looking for purchase mortgages had been counterbalanced by a rise in those looking to remortgage to pay for home improvements.
He said the type of improvements homeowners are looking to finance were indicative of borrowers struggling to find a suitable property to downsize to.
Stair lifts and ramps
Berry said: “We’ve certainly seen a decreasing trend of older borrowers purchasing during the last 12 months but this has been tempered somewhat by an increase in capital raising. This move for additional funds is usually to extend space or modify personal requirements so ramps, stairlifts or other improvements, which make the home more suited to ageing needs, are created.”
Berry had also noticed a growing use of bridging to cover equity release borrowing. He added: “We have also seen a small number of examples where bridging finance has been used to raise capital quickly as an alternative to equity release. This usually occurs when funds are needed quickly.”
Stuart Powell, managing director at Ocean Equity Release, said he had noticed a rise in the use of equity release for home improvements.
Powell said: “We have many clients taking out equity release to fund home adaptations for older age although they are also using it to make their homes more environmentally friendly with solar panels, heat pumps etc to cope with the rising fuel costs.”
Samantha Bickford, mortgage and equity release specialist at Clarity Wealth Management said that soaring property prices were benefiting rightsizers.
She said: “Borrowers are finding they are able to borrow more against the increased property value to complete these home improvements. Second charges and bridging loans are an option for additional borrowing once further advances and remortgages have been ruled out. Second charges and bridging loans are an expensive form of borrowing, and usually there is a better solution which should always be explored with an experienced mortgage broker.
Scott Taylor-Barr, a financial Adviser at Carl Summers Financial Services said the shortage of housing stock in most areas has led many people to consider creating their own forever home.
“Many have simply been unable to find the property they want, or certainly at a price they can afford, so have started to look at what changes they can make to their current home; extensions, luxury kitchens, home offices at the bottom of the garden, loft conversions to create master suites, even major internal renovations with walls coming down and staircases being moved are considerations that many wouldn’t have been entertaining previously, but will now – inspired by DIY SOS, Grand Designs and George Clarke among others.
“These types of radical changes to the living space don’t come cheap, so additional borrowing in the form of remortgages, further advances, or second charges are common to make these dreams a reality.”
“Guidance that I give to all my clients looking to do this type of work is to overestimate everything. It’s far easier to borrow more than you need and then pay it back to the lender at the end of the project, than to run out of funds halfway through and have to go back cap-in-hand to request additional funds – to which the answer could well be “no”.”
Robert Payne, director at Langley House Mortgages, is concerned that in their quest to find the ‘right size’ borrowers might be like Goldilocks, stepping too far out of their comfort zone.
“Great care should be taken before committing to a second charge or bridge, as these types of loans come at a higher rate than mainstream lending and often have higher fees as well. Whilst they do provide a solution to financing home improvements, consideration should be given to what the additional monthly payments are going to be and also whether you will be able to afford to remortgage the entire amount of secured borrowing when it comes to switching products.”
Sabrina Hall, a mortgage and protection adviser at Kind Financial Services, said even with finance in place, rightsizers were facing other challenges.
“I’ve definitely seen more enquiries for further advances and remortgages to draw additional funds out for home improvements.”
“The problem, however, that some of these clients are seeing is how hard it is to find builders and tradespeople who are available to complete the work.”
“In addition, some clients are being put off by the increasing costs of this work. I’ve had two clients who applied for further advances but while it was being processed the costs were spiralling so much that they eventually decided against doing the work and put the project on hold for a couple of years.”