Second-time buyers 'stuck on the ladder'

Amanda Jarvis

May 22, 2006

Common consensus is that first-time buyers are facing a tough time, but figures from Abbey show that second-time buyers are also struggling in the property market. Forty nine per cent of second-time buyers (people who own their first property and who are looking to trade up) say that the biggest single obstacle to moving to a bigger property is that they can’t afford a bigger mortgage. A further seven per cent say that they also cannot afford the cost of moving, including stamp duty and legal fees.

Trading up to the next step on the property ladder is becoming so difficult that 42 per cent of homeowners say that they will stay put and extend instead. With almost half (forty seven per cent) of people saying that they really need more space, it does seem a logical option*.

Although extensions are a popular option, it’s not a viable alternative for everyone. One in three people (34 per cent) want to move because they don’t like the area they live in and 12 per cent would relocate to reduce the commute to work or be closer to family and friends.

Paula Ickinger, Product Executive, Mortgages and Loans said: “Almost half of the UK population own their home with a mortgage, and a further 23% own their home outright. If these homeowners do decide to stay put and extend this could create a bottleneck in the housing market for both new and existing property owners.

“Generally speaking, people are getting on the property ladder later in life than they were ten or twenty years ago, and clearly house price inflation is an issue. Wage increases have not kept pace and therefore this has had a significant impact on existing homeowners’ ability to move up to a bigger property. First-time buyers are getting older whilst they are also squeezing in careers and families before turning forty. They may be trying to take bigger steps up the ladder in a shorter period of time, but high house prices are preventing them from doing so.”

According to the CML, the difference in mortgage costs for first-time buyers and people moving home is quite significant, and perhaps more than borrowers anticipate. In 2005, the average mortgage for a first time buyer was £90,328, whilst the average mortgage for people moving house was £113,3741, a difference of £23,046. In terms of monthly mortgage repayments, this could be at least £1352 extra per month.

Paula Ickinger added: “Moving is a time of uncertainty and people need to ensure that their finances are in order. If taking on a higher mortgage is a worry for people, Abbey has a range of fixed rate mortgages for movers, so people can rest assured they can budget for their mortgage, safe in the knowledge it won’t change during the fixed rate term regardless of movement in base rate. We have recently launched long-term seven and ten year fixed rates, which offer certainty for a longer period, during which time borrowers’ affordability may well improve.”

Sign up to our daily email