Parents are now supporting movement up the property ladder of second steppers
Buyers in the UK seeking to move up the property ladder from their first home to their second and increasingly seeking financial help from their parents, according to new research.
Normally it is first time buyers who have used what has become known as the bank of mum and dad but with the cost of moving up the ladder now out at an average of £41,000 second steppers are also doing so.
One in six, some 16%, of second steppers are considering asking their family for financial support to make their next move on the housing ladder, a study from Lloyds TSB shows.
The price difference between a typical first time buyer home and the house desired by many second steppers is on average £41,000, and as high as almost £98,000 in Greater London.
Over half, 52%, of second steppers believe a shortfall or lack of a deposit will impact the purchase of their new house.
A recent Lloyds TSB report highlighted that almost two thirds, 62%, 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.
The majority of second steppers will be hoping to use savings or equity in their current property to fund the move to their second property. However, one in six are also considering going back to their family to ask for financial support.
The research revealed that two fifths, 44%, of first time buyers received help from someone for the deposit on their first property. With almost 90% of first time buyers asking for support in Scotland and a significant eight out of 10 first time buyers in London asking for financial help.
The average loan size first time buyers received from family or friends the first time around reached almost £13,000 and many are looking for a similar amount again to help them move up the ladder.
The additional capital needed by second steppers to trade up currently stands at an average of £41,000, a 194% increase on the £14,000 that was required 10 years ago.
Two thirds of current first time buyers are currently living in flats or terraced houses with an average value of a flat at £148,502. Meanwhile, over half hope their next move will be to a three bedroom house. The average price for a semi detached house currently stands at £189,312.
This means that those looking to make this move face a 27% premium just to trade up, before adding on the cost of moving or the fact that there may be an equity shortfall in their current property. Since 2001, the average cost associated with moving home for someone who already owns a home rose by 69% from £5,290 in 2001 to £8,922 in 20111.
In percentage terms, second steppers in the south east face the biggest premium to trade up at 52%, and will need almost £85,000 to trade up from the typical first property to their second home. Londoners will need to find £97,916 to fund the same gap, although the premium across the capital is only 27%. Second Steppers in Wales need the lowest deposit with the cost of trading up at just over £6,000.
‘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,’ said Stephen Noakes, mortgage director, Lloyds TSB.
‘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 attention and 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,’ he added.