19th October 2015
It is not just first time buyers who are troubling the ‘Bank of Mum and Dad’ for a financial help these days.
New research from Lloyds shows nearly a fifth of homeowners, at 17%, looking to take the next step up the housing ladder are considering turning to their friends or family to help fund the move, as trading up costs rapidly increase.
According to the lender’s Second Steppers report despite increasing house prices boosting equity levels for Second Steppers, the latest estimates shows people living in their first home still have to find an extra £125,694 to plug the gap between the sale price of their current property and the cost of the house they would ideally move to – typically a detached property.
This gap reduces to £17,370 if the Second Stepper moves to a semi-detached home. Meanwhile the research also revealed that the size of the deposit required is still seen as the biggest barrier to moving home, with the problem cited by 44% of those surveyed.
While 71% intend to raise the deposit required for their next property purchase from equity in their current home, and over half, at 57%, will raid their savings, some 14% said they were considering returning to family members to help them out – typically asking for £22,480.
This is up from £21,080 in 2014 and £21,273 in 2013. Half, at 50%, of these Second Steppers feel that they would not be able to make the next move on the property ladder without this financial assistance.
The research also revealed that 48% had also required help with the deposit on their first property. The average loan size first-time buyers received from family and friends the first time around reached almost £24,000, only slightly more than they are hoping to borrow again from parents or grandparents to take their next step on the housing ladder.
Of those considering asking for financial support, 43% admitted that parents have had to make sacrifices to help them get on and move up the ladder, although this has significantly fallen from 70% in 2013. One in five, or 20%, also said that they will now have children later in life due to the challenges of moving up the housing ladder into a family home.
Andrew Mason, Lloyds Bank mortgages director, commented: “Parental support has been playing an important role in helping young people get on the property ladder for decades but this is being stretched further, with many Second Steppers continuing to be reliant on the Bank of Mum and Dad to help them make the next move.”
Notably during the past 12 months Second Steppers have been increasing their monthly savings and overpaying on their mortgage to help prepare for their next house move. Over a third of second step homebuyers have increased their savings, compared to 29% in 2012. A similar number have also been overpaying on their mortgage, compared to around a quarter in 2012.
Mason continued: “For many, parental support will be reaching its limit, as prices increase, so it’s encouraging to see so many Second Steppers also standing on their own two feet, planning ahead and taking action to top up their equity levels.”
The research also revealed that almost two thirds have either continued to save or started to save since they moved into their first property.
– Click image to enlarge