5th June 2015
House price rises mean most ‘second steppers’ are no longer trapped in negative equity but challenges to buying a second home still remain.
Lloyds fifth annual Second Stepper report shows over the past fie years conditions for first-time sellers have significantly improved. Thanks to rising house prices that have boosted equity and an influx of first-time buyers, more people are able to move up the property ladder.
Seven in 10 homeowners feel their equity position has improved over the past year, particularly as the current crop of second steppers would have bought at the bottom of the market in 2009 when prices were an average 31% lower.
This means the average second stepper has an average equity level of £87,096 – equivalent to 29% of the average price of a typical second stepper home, which costs £304,963.
The estimated equity level has increased £36,000 in the past year, from £50,655 due to the increase in property prices. This has had a knock on effect of making buying a second home more affordable than a year ago when compared with earnings – in the past year affordability has fallen from 7.3 time UK gross annual earnings to 6.4 times.
However, second steppers face their own challenges. Those moving have to find £128,390 to plug the gap between the sale price of their current property and the cost of the house they would like to move into, which is typically a detached home. If they move into a semi-detached home, the gap reduced to £17,864.
There are regional difference, those in Northern Ireland need to find £68,000 to make the leap to their desired second home while those in London would need to find £330,000.
Deposit size and tighter mortgage lending criteria are still the two main barriers to moving but one in three also believe the market conditions for second steppers has improved.
Andy Hulme, Lloyds Bank mortgages director, said: ‘Over the past few years second steppers have faced some tough challenges and many have been stuck in their first homes. We are now finally seeing a much needed boost to this vital part of the housing market, enabling more second steppers to make the next move on the housing ladder.’
He added: ‘While challenges remain as second steppers try to bridge the gap to the next rung on the ladder, a steady rise in property values in 2015 should further ease the constraint on many and this will have a positive knock-on effect for the whole of the housing market.’