Mum and dad help second steppers up ladder
According to the latest research from Lloyds TSB, one in six (16%) second steppers are contemplating turning to the bank of mum and dad to plug the gap between the value of their first home and the cost of the house they would ideally move to.
The majority of second steppers will be hoping to use savings (59%) or equity in their current property (77%) to fund the move to their second property. However, almost one in five (18%) are also considering going back to their family – such as parents and grand-parents – to ask for financial support.
The average loan size first-time buyers received from family or friends reached almost £13,700 up from £13,000 last year. Yet, the amount requested by second steppers to help them move up the ladder has increased by almost £7,000 in the past 12 months to reach £19,216 (up from £12,746 in 2011).
The research highlights that almost two thirds (61%) of second steppers have wanted to climb up the ladder in the past 12 months but have been unable to do so as they face an increasing number of challenges.
Over half (55%) of all those questioned agree that not having enough saved to cover the deposit is preventing them from taking the second step on the property ladder. However, over three quarters (78%) of second steppers are struggling to find a suitable (40%) or affordable (38%) property.
The additional capital needed by second steppers to trade up – calculated as the price difference between a typical first-time buyer home (a flat) and the house desired by many second-steppers (semi-detached) – currently stands at an average of £43,800; a 143% increase on the £18,000 that was required 10 years ago. This gap has increased by £3,000 over the past year.
Whilst a third of first time buyers surveyed are currently living in flats (36%), over half (53%) hope their next move will be to a three bedroom house.
The average value of a flat currently stands at £149,321 compared with £193,156 on average for a semi-detached house. This means that those looking to make this move face a 29% premium just to trade up, before adding on the cost of moving or the potential that there may be an equity shortfall in their current property.
Marc Page, mortgages director at Lloyds TSB said: “We already know that second steppers face a number of tough challenges and in many ways have been the hardest hit by the subdued housing market so it is unsurprising that they are struggling to fund the gap needed to trade up to their preferred second home.
“Parents have long been helping to fund their children’s first home, but many are now having to provide further support as they move up the ladder. This indicates that these customers still need further support.
“To achieve a sustainable housing market we need to see movement throughout the market. If second steppers get stuck on the first rung, movement at the bottom half of the ladder comes to a standstill.”