Homeowners trapped in starter homes: can't afford to trade up

Sarah Coles
London house price rises 'slowed'
London house price rises 'slowed'

It's not just first time buyers who are trapped by property prices: people who need to trade up to their second home are also facing impossible circumstances, because if they want to move up the housing ladder they'll need to find an average of £60,000.

Research from Lloyds Bank found that so-called Second Steppers need to find an extra £58,400 to fund the move - that's twice as much as the average first-time buyer deposit. It's also £15,000 more than they needed last year - and £18,000 more than they needed in 2010. The gap is growing as house prices rise, and the prices of a one-bedroom flat and a two-bedroom house start to stretch further and further apart.
The gap between first and second properties varies around the country. In the West Midlands, for example, people need just £21,000 more to move up the ladder, while in East Anglia buyer say they need £80,800 more.

To make matters worse, stamp duty is tied to house prices, so that as prices grow, the tax bill grows too. Then when you add in the cost of moving and solicitors and surveyor's fees - it's easy to see why 46% of people say this is a major barrier to a move.

Is this so bad?
But things may not be as bad as they seem. Second Stepper concerns about finding the money to make the move are actually receding. Last year half of them worried that they'd never save the cash they need for a move, while this year that figure has dropped to just over a third.

It reflects the fact that this group is benefiting from the growth in house prices: their current properties are worth an average of 20% more since they bought an average of four years ago. It means they have risen from just £186,800 to £223,000. The levels of equity people have in their property, therefore, have often risen enough to allow them to borrow the extra cash they need in order to buy something bigger and more expensive.

As a result, the percentage of people who want to move up the property ladder but cannot afford to is down from 61% last year to 54% this year.

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First Solar House for Sale
First Solar House for Sale

However, before we celebrate the new ease of trading up, it's worth emphasising that even the new more positive figures show that more than half of people are living in cramped and unsuitable homes because they cannot afford to trade up to a property that meets their needs.In some parts of the country these figures are even more alarming. In Central London and the North West, for example, around two thirds of people are in this position.

Lloyds adds that this isn't just bad news for second steppers. This particular group is vital to the health of the property market - as they link the engine of first-time-buyers to the rest of the market. If they cannot afford to move on, then it doesn't matter how strong the first-time-buyer market becomes: anyone with more than two bedrooms is going to struggle to trade up and move on.

But what do you think? Are second steppers worrying needlessly, or are rising house prices squeezing even more people out of buying the home that meets their needs?

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