Second-time buyers struggling to move up ladder - Mortgages - News - Moneyfacts


Second-time buyers struggling to move up ladder

Second-time buyers struggling to move up ladder

Category: Mortgages

Updated: 19/12/2011
First Published: 19/12/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Homeowners have been warned it is now harder to move up the housing ladder than to get on it.

According to new research from Lloyds TSB, so called 'second steppers', who are still living in their first home but looking to take their next step up the property ladder, have seen their home affordability drop to its least favourable level for over a quarter of a century.

The lender's affordability measure, which is calculated as the average price of a typical second stepper home less their current equity position as a ratio of average earnings, stood at 5.2 times gross annual average earnings in October 2011.

This is the highest ratio since records began in 1987, and has almost doubled over the past decade, rising from 3.0 in 2001.

The home affordability ratio for second steppers is also now less favourable than for those entering the housing market for the first time (4.1).

Driving the decline in affordability is falling house prices.

Indeed, the average price paid by a first time buyer has fallen by 23% since the peak of the market in 2007.

With the research finding that first time buyers intend to stay in their first home for an average of four years, on this basis, many potential second steppers in 2011 would have bought their first home at the peak of the market in 2007.

Lloyds has calculated that this means these homeowners are now, on average, likely to be in a negative equity position of almost £10,000.

Suren Thiru, housing economist at Lloyds TSB, said the deterioration in home affordability over the past few years among those looking to take their second step on the property ladder has been significant.

"This reflects the impact of the decline in house prices since 2007 on the amount of equity those who bought for the first time at the peak of the market have in their homes.

"As a result, many are faced with a very tough challenge to make their next move on the property ladder.

"The issue of second stepper affordability is a key one in trying get the housing market moving again with the current difficulties in this segment of the market restricting the supply of starter properties for first time buyers as well as preventing many of those who need to move from doing so."

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