How homeowners’ plans to downsize could be impacted by Budget as mortgage rates fall

1. Money

A new Mansion Tax and falling interest rates for mortgage deals might have older homeowners considering a move

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Among those listening carefully for any property updates as Chancellor Rachel Reeves delivered the 2025 Autumn Budget, will have been Brits contemplating a major move often viewed as a “huge” life decision.

These are potential downsizers, and while estimates vary on their numbers, data and surveys both suggest there has been serious interest in recent years to sell up their home and go smaller.

Regency Living, which sells bungalows, says Google search figures show weekly searches for “downsizing” have risen by 450 per cent in the past five years. Meanwhile research undertaken by Suffolk Building Society last year estimates that 15 per cent of UK homeowners, some 6.3m adults, are considering or planning to downsize during the current five-year parliamentary session.

Alex Edmans, product director at Saga Money, calls downsizing “a huge life decision” for many, but one which particularly affects the over 50s, who may find themselves considering moving once younger generations have flown the nest. She points to benefits including reducing housing costs, time spent on maintenance and enabling a move closer to family.

Edmans adds: “With the 2025 Budget now confirmed, now is a good time for homeowners to review their options.”

While real estate experts say they was little in Reeves’ red box that would act as major sweeteners to sell, there were certain updates, coupled with current lending conditions, that may encourage people to feel that 2026 could be a sensible time to downsize.

Mansion tax will hit larger homes

A mansion tax was widely rumoured in the run-up to November 26, and it has now been confirmed how residential properties in England worth £2 million or more will be impacted.

The High Value Council Tax Surcharge comes in from April 2028, with four bands, and the annual charge is on top of existing council tax.

Larger homes and those in the capital could be more exposed. Dominic Agace, chief executive of estate agency group Winkworth says: “The Budget contained no measures that would dissuade people from downsizing. If anything, the changes in council tax might well give a nudge to those asset rich and cash poor retirees, mainly in London, to make the move.”

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Peter Graham, national tax lead for real estate and construction at accountancy firm RSM UK says the surcharge “could detrimentally impact those who are asset rich due to rapidly increasing house prices, but who, in reality, may not be wealthy”.

He adds this could become an added incentive for people in high value properties looking to downsize, but points out “the costs of moving, including stamp duty land tax, may be prohibitive”.

Tom Bill, head of UK residential research at estate agent Knight Frank, added: “The mansion tax announcement is unlikely to mean many downsizers suddenly accelerate their plans. It won’t be introduced for three years and comes with the possibility that payment can be deferred until sale or death. However, the precedent of a new tax on higher-value homes and the possibility of future threshold reductions may alter their thinking in the medium to long-term.”

No stamp duty changes

There may have been plenty of speculation around stamp duty reform, but no changes were actually announced, at least where property is concerned.

Marcus Dixon, director of UK residential research at real estate consultancy JLL comments: “To increase activity in the downsizer market we’d have hoped for more carrots, with a reduction in moving costs (namely stamp duty) far more effective in encouraging more rightsizing.

“But despite the lack of demand side incentives, we still expect a pick-up in activity in 2026. Home movers who have been sitting on the sidelines waiting for the Budget now have some much-needed clarity.”

Borrowing terms could be appealing

In welcome news for buyers and sellers, Dixon adds that rates are heading down, with competitive mortgage deals.

Ying Tan, chief executive of digital mortgage broker Habito, outlines why he considers that even without specific downsizer incentives, the financial case to potentially make the move “is already strong”.

He says moving from a four- or five-bed home into something smaller doesn’t just reduce the price of the new property, it drops you into a lower loan-to-value band, where today’s mortgage rates are lower.

Habito has produced the below table that gives an example scenario of a homeowner downsizing.

The firm’s calculations are over 25 years, on capital and interest repayment for two and five year average rates, for submitted applications in the last three months at Habito.

Tan says: “So while the Chancellor didn’t actively encourage downsizing for the majority, the combination of cheaper borrowing at lower LTVs and the future cost of holding high-value homes means more large-property owners may start running the numbers sooner than expected.”

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