The impact of the housing crisis on divorcing couples

The housing crisis has been dominating the news for months. High mortgage rates, extortionate rental prices and generally a lack of affordable housing have been building to a peak and having an impact on millions of people in the UK.

For separating and divorcing couples, the housing crisis is quickly becoming one of the primary challenges they are facing. In most divorces and relationship breakdowns, the parties have to move house and adapt to running a home on one income, when previously there may have been two.

However, the current lack of affordable housing and sky-high mortgage rates means that separating couples simply cannot afford to move out, or to run the family home on one income.

Earlier in the year, we saw mortgages coming to the fore as one of the key battlegrounds of divorcing couples. Typical five-year fixed mortgage rates reached new heights of 6% and divorcing couples were faced with the difficult decision of whether to keep the family home with its lower rate mortgage or port it to a new property, or sell off the property and start afresh, but with a much higher mortgage rate.

Couples argued about who would get to keep the low mortgage rate, and this, in some cases, has significantly delayed proceedings. For some couples, they have had to go to mediation to resolve the issue, for others who cannot come to an agreement, the court has had to step in.

There are, generally speaking, three options on when it comes to property in divorce:

1)      Sell the house, pay off the mortgage and then divide any equity – equity is usually then used to purchase or rent separate properties

2)      Keep the house and the mortgage in both names, and agree to sell it at a later point, sometimes when the youngest child turns 18

3)      One party buys out their ex-spouse’s interest in the house, transferring ownership to their sole name.

However, the ongoing impact of the cost-of-living crisis and the skyrocketing mortgage rates, as well as a chronic shortage of rental properties, has called all of this into question.

Division of property is part of the financial settlement in divorce, and if the couple decide to sell the house, then the equity received is apportioned depending upon a number of factors, including the mortgage borrowing capacity of each party as an individual.

However, being able to afford two separate properties from the money in the matrimonial pot, even with the sale of the family home, is not guaranteed, particularly in the current climate.

For those couples who have divorced and are individually looking for rental properties, they are coming into an insecure market where prices are continuing to creep up.

Not only this, but the renting market has recently experienced another setback. The government has delayed the Renters (Reform) Bill, which would improve security for renters by imposing additional restrictions and obligations on private landlords. This would primarily have abolished no-fault evictions where landlords have been permitted to gain possession of their property without proving tenant default under Section 21 of the Housing Act.

For those entering this market newly separated, it is a worrying time.

Many divorcing couples are now looking to more creative avenues to solve the issue, such as birdnesting. Birdnesting is a housing option post-separation where the children stay in the family home, and the parents rotate into the house when it is their contact time.

Birdnesting parents may well look for a rental property or may stay with friends or family until the market settles down and prices level out.

It looks set that the housing crisis will continue and the market remain volatile so we may see a range of more creative solutions for divorcees coming into play, particularly those with children who need to ensure the wellbeing of their family.

However, it is undeniable that this is a stressful time, and divorcing couples should seek legal advice and professional help to fully understand their position and potential futures.

This article has been written by Joanna Newton, a Partner at Stowe Family Law

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