29th June 2015
Some 34% of British homeowners aspiring to move up the property ladder in the next five years admit they would struggle to make that move claims new research from MoneySuperMarket.
The analysis from the comparison website revealed 26% of those looking to move to a bigger property think it will be difficult to make the leap, and a further 9% would find it very difficult.
This tally rises to nearly half, at 41%, of those aged between 35 and 54 years who would find it tough to upscale their current property, while 28% of 18 to 34 year olds think the same.
Kevin Mountford, head of banking at MoneySuperMarket highlighted that there was a time when those in the 35 to 54 age bracket would have been looking to downsize but now this is the age group where people are starting a family in some cases or still housing grown up children who are struggling to find their own way.
He said: “Although they might have the earning potential to make that next step there is the constraint of mortgage term that comes with their age. Lenders will tend to fix the term of repayment to retirement age, so for those movers aged over 34 the repayments on increased value mortgages will be much higher as they’re paying it back over a shorter time.”
For example numbers from MoneySuperMarket show a £250,000 mortgage on the leading two year fixed at 1.05% could be taken out by a 30-year old with a 30-year term and the monthly repayments would be £810. However for someone aged 45, the same mortgage over a 20 year term would have monthly repayments of £1,155 – £345 extra to find each month to make that next move.
But money is the main reason property owners would find it hard to move on up. Almost at 47% stated house prices are so high they cannot afford to take the next step yet, while 43% simply cannot afford the cost of moving. In fact, current homeowners think they’d need to save up £10,549 on average before they would
Mountford added: “Getting a foot on the property ladder in the first place can be hard work, but for many homeowners it’s just as difficult to take the next step. House prices have rocketed in recent years and tougher borrowing rules have made the search for a mortgage slightly harder.
“It is vital for a healthy housing market that people are able to move up the property ladder otherwise the whole system can come to a grinding halt, leading to a shortage of property. As a result, second steppers can’t afford to be complacent when it comes to deciding whether to upsize their home. Planning a budget will be crucial, and really taking the time to sit down and work out exactly what costs will be involved is essential.”
On the plus side, there is a great deal of competition in the mortgage market at the moment, with a huge drop in fixed mortgage rates over the past few years, some with manageable fees. Perks such as free legal costs and free valuations on properties are also offered by some lenders in order to get customers through their doors.
“However, it’s important to always look at the bigger picture when searching for a new mortgage. Don’t get lured in by a headline rate, and work out the total cost you have to repay over the term of the offer before agreeing to a deal. Also, think about whether you want a fixed or variable rate deal, if you opt for a variable rate mortgage, you need to ensure that you will be able to afford your monthly repayments if and when interest rates do rise as they won’t stay at this level forever,” added Mountford.