Research from Lloyds Bank has shown that a quarter of home owners wanting to move onto the 2nd rung of the property ladder are finding it even harder than it was to buy their first home (1). The main difficulties highlighted in the report are the lack of affordable family-sized properties, the cost of stamp duty and worries about interest rate changes (2).
Faced with such issues it is perhaps unsurprising that around a third of home buyers wanting to buy a second home, expect to go cap in hand to those around them to borrow. an average of more than £21,200 (1). This borrowing is despite half of those having already received an average of £21,500 in support to but their first property (2).
The price difference between a typical first-time-buyer home and a second stepper’s ideal home is around £126,000 a figure some £21,005 higher than the typical equity in the first property (2). So in addition to this equity and any savings, one in five 2nd steppers will go to parents, one in ten will ask grandparents for property money and and more than one in 20 are considering asking a friend for help (2).
With help from family and friends required, perspective homebuyers are also planning to make their own sacrifices. These include having children later in life, smaller families and even changing their career to secure higher salaries (2).
Andy Mason, mortgage director at Lloyds Bank said “Parental support continues to play a vital role in helping young people to get on the property ladder. It is clear that despite improved conditions for this part of the housing market, second steppers will still rely on the “Bank of Mum and Dad”, with hard-pressed parents being once again called on for financial help”.
“However, it is encouraging to see many second steppers planning ahead by overpaying their mortgage and making bigger contributions into savings accounts to prepare for when the perfect home becomes available.” (2)
Even if family friends do help with funds for the deposit there are other problems on the horizon. There are now clear indications that after 8 years of historic lows interest rates may be about to rise (3). For those who have stretched themselves with large loans to buy a property this could cause major problems.
Your home may be repossessed if you do not keep up repayments on your mortgage.