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Downsizers are often associated with homeowners approaching retirement but with current market conditions, younger households are likely to consider moving into a smaller home sooner.

Bridgit CEO Aaron Bassin said the worsening conditions this year will trigger older Australians to make the downsize move sooner, while giving rise to a new, younger demographic of downsizers.

“With the current economic environment, we will see a large cohort choose to make their downsize sooner than planned, to free up their equity in order to support them with the rising cost of living, avoid the requirements to pay an increasing mortgage and live the lifestyle they are looking for,” he said.

Pensioners to downsize sooner

Mr Bassin said around 600,000 households are planning to downsize over the year, with pensioners leading the trend.

“The pension age, which was 65 just five years ago, is set to increase to 67 this July, suggesting that Australians are working for longer, to build up their super and to support the higher cost of living,” he said.

“But not everyone will be able to or want to work for longer — instead, we’ll see older homeowners downsize sooner and take advantage of the financial incentives available to them, such as tax exemptions and recent changes to superannuation benefits.”

In fact, homeowners aged over 55 can make tax-free contributions of up to $300,000 to their super funds, especially when they have claimed ownership on a home they are selling for more than 10 years.

In October 2022, changes to the social security laws were proposed, providing pensioners incentives to downsize and find a more appropriate home.

The new rules provide opportunities for pensioners to downsize and receive an additional 12-month exemption to their social security asset test before losing or receiving reduced payments.

“While the new legislation will give downsizers more time to move and make the adjustments to their new home without being penalised, in a cooling property market, I envisage them doing it sooner to get the best sale price,” Mr Bassin said.

Younger downsizers on the rise

Mr Bassin said many younger homeowners and families are feeling the pressure of rising rates and increasing cost of living. In fact, mortgage stress levels has intensified, now above the long-term average.

“A significant proportion of homeowners will come off their fixed-rate home loans between July and December and switch to variable rates; the steep and consecutive interest rate increases will see some people’s repayments double,” Mr Bassin said.

“We’ll see some unable to service their home loans and make the tough decision to sell, while others will be on the front-foot and sell sooner to avoid the hit in further rate rises in a bid to ease the financial impact it will have on them.”

For homeowners downsizing this year, Mr Bassin said it is crucial for them to be prepared, finance-wise.

“With Australia also facing a national rental crisis, those who find their next purchase and don’t have their next property move in mind will face added stress and hidden expenses,” he said.

Bridgit’s study last year found that households have to pay an average of $8,300 in relocation costs if they do not secure their next property before selling.

“Bridging finance may be the best solution for you to reduce the added stress and remove the hidden costs in finding and securing your next property,” Mr Bassin said.

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
$2,408
Principal & Interest
Variable
$0
$530
70%
Featured Online ExclusiveUp to $4k cashback
  • Immediate cashback upon settlement
  • $2000 for loans up to $700,000
  • $4000 for loans over $700,000
5.94% p.a.
5.95% p.a.
$2,383
Principal & Interest
Variable
$0
$0
90%
5.95% p.a.
5.95% p.a.
$2,385
Principal & Interest
Variable
$0
$0
90%
5.99% p.a.
5.90% p.a.
$2,396
Principal & Interest
Variable
$0
$0
80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of .

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