UK second steppers finding it hard to move up the housing ladder

Whilst recent data suggests that first time buyers are starting to return to the UK housing market following a raft of government schemes in 2012, there is little improvement for those wishing to move further up the housing ladder.

The third annual Second Steppers report from Lloyds TSB has found that 61% of second steppers who wanted to move up the ladder in 2012 were unable and 53% agree that market conditions haven’t improved for them compared with the previous year. Raising a deposit (65%), a lack of affordable housing to move into (53%), the high costs associated with moving including stamp duty (52%), negative equity (25%), and a lack of offers from potential buyers (25%) are still key issues for many second steppers.

However, there are signs of hope as some 31% think the housing market will improve this year and 22% think it will be easier to sell their property this year. However, some 22% of respondents still believe it is actually harder to move up the ladder than it was to get on it in the first place, whilst 46% of second steppers believe it is equally difficult to move up the ladder, than it was taking the first step onto it.

Second steppers are currently looking to stay longer in their first home, a sign that market conditions are changing their expectations. In 2010, they expected to spend four years in their first home, whereas now they are more likely to plan to stay for five years. On average, second steppers have already had their home on the market for seven months, whilst 12% have also previously marketed their property. Some 53% are looking to move as their current property is too small for their needs, 24% are expecting to start a family and need more room, 44% plan to move to a new area whilst 12% are relocating for work.

A significant 65% of second steppers believe that the level of deposit required is the main challenge for them being able to arrange a mortgage, and as a result is a key reason they have not been able to move up the housing ladder so far. In particular, 16% say they don’t have any money saved to put towards a deposit, 28% don’t have enough of a deposit saved at present and 11% need more of a deposit than originally expected.

Quote from PropertyCommunity.com : “Low equity levels continue to hinder those wishing to move up the housing ladder in the UK as the housing market remains flat, it is claimed.”

The average deposit for a typical second stepper in 2012 was £58,836, almost double the average deposit required in 2002 which was £31,189. Meanwhile, the research indicates that second steppers have on average just over £40,000 of equity in their current property, with 29% having less than £20,000, leaving a considerable equity shortfall. Some 58% expected to have more equity in their property by now.

When questioned, 38% of second steppers blame the lack of affordable housing available as a key reason they have been unable to move up the ladder, whilst 15% are waiting for property prices to come down and be more affordable before making the move. Additionally, the costs associated with moving are creating another barrier, with 32% agreeing that stamp duty it is too high and 20% concerned about the overall cost of moving.

‘Despite recent improvements in the housing market, first time sellers continue to be faced with some very real and tough challenges when trying to make their next move on the property ladder. It is vital that this group of home movers receive more support and attention as they play an intrinsic role in getting the housing market moving again,’ said Stephen Noakes, mortgage director, Lloyds TSB.

‘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, and this bottleneck will not only restrict the supply of starter properties but will have a knock on effect across the whole of the housing market,’ he added.

The good news is that 31% of second steppers believe the housing market will improve this year and 22% think it will be easier to sell their property this year.