How homeowners’ plans to downsize could be impacted by Budget as mortgage rates fall
Among those listening intently for any updates on estates as Chancellor Rachel Reeves unveils the autumn 2025 budget will be Brits considering a major move, often seen as a “huge” life decision.
These are potential reasons for downsizing, and although estimates vary as to their numbers, data and surveys show that there has been significant interest in selling their homes and downsizing in recent years.
Regency Living, a company that sells bungalows, says Google search figures show weekly searches for “downsizing” have increased by 450 percent in the past five years. Meanwhile, research carried out by the Suffolk Building Society last year estimates that 15 per cent of UK homeowners – around 6.3 million adults – are considering or planning to downsize during the current five-year parliamentary session.
Alex Edmans, product director at Saga Money, describes downsizing as a “big life decision” for many, but it particularly affects over-50s who may find themselves considering moving after younger generations have flown the nest. He points out benefits such as reducing housing costs, time spent on care, and the ability to move closer to family.
Ms Edmans adds: “Now that the 2025 Budget has been approved, now is a good time for homeowners to consider their options.”
While real estate experts say there is little in Reeves’ red case that will serve as major sweeteners to sell, there were some updates that, along with current loan conditions, could encourage people to feel 2026 could be a sensible time to downsize.
Mansion tax will hit big houses
Mansion tax was widely rumored until 26 November and it was confirmed how residential properties in England valued at £2 million or more would be affected.
The High Value Council Tax Surcharge comes in four bands from April 2028 and the annual charge is on top of existing council tax.
Larger homes and those in the capital may be more exposed. Dominic Agace, chief executive of estate agent group Winkworth, said: “The budget included no measures to deter people from downsizing. Changes to council tax could encourage asset-rich and cash-strapped retirees to take action, particularly in London.”
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Peter Graham, national tax officer for property and construction at accountancy firm RSM UK, said the surcharge “It could negatively impact people who are asset-rich but not actually rich due to rapidly rising house prices.”
He adds that this could be an added incentive for people looking to downsize on high-value properties, but cautions that “moving costs, including stamp duty land tax, can be prohibitive.”
Tom Bill, head of UK housing research at estate agent Knight Frank, added: “The announcement of a mansion tax is unlikely to mean many downsizers will suddenly accelerate their plans. It won’t be introduced for three years and carries with it the possibility of payment being deferred until sale or death. However, a new tax precedent on higher value homes and the possibility of threshold reductions in the future could change their minds in the medium to long term.”
No stamp duty change
There may have been much speculation about stamp duty reform, but no changes have actually been announced, at least where property is concerned.
Marcus Dixon, director of UK housing research at property consultancy JLL, comments: “To drive activity in the downsizing market, we would expect there to be more carrots, with reductions in carrying costs (i.e. stamp duty) being much more effective in encouraging more right-sizing.
“But despite the absence of demand-side stimulus, we still expect a rebound in activity in 2026. House movers sitting on the sidelines waiting for the Budget now have much-needed clarity.”
Borrowing terms may be attractive
In welcome news for buyers and sellers, Dixon adds that rates are on the decline with competitive mortgage deals.
Ying Tan, managing director of digital mortgage broker Habito, explains that even without specific downsizing incentives, he thinks the financial case for potentially making the move is “already strong”.
Upgrading from a four- or five-bed home to a smaller home not only lowers the price of the new property, he says, but also drops you into a lower loan-to-value range where today’s mortgage rates are lower.
Habito has prepared the table below showing an example scenario of homeowners downsizing.
The firm’s calculations are over 25 years for capital and interest repayments at two and five-year average rates for applications made to Habito in the last three months.
Mr Tan says: “While the Chancellor is not actively encouraging downsizing for the majority, the combination of cheaper borrowing at lower LTVs and the future cost of holding high-value homes means more large landlords may start rolling out the numbers sooner than expected.”
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