House price rises helping second home buyers
Rising house prices mean that things are looking up for first time sellers, according to Lloyds Bank's fifth annual Second Stepper report.
'Second steppers' are a crucial part of the housing market, serving as the link between first-time buyers and the rest of the market. If they can't move up the housing ladder, the whole thing grinds to a halt.
And while a couple of years ago many second steppers were trapped in their first home as a result of holding little or no equity in the property, that appears to be changing.
From negative to positive equity
Research from Lloyds Bank has found that most second steppers are no longer trapped in negative equity thanks to rising house prices pushing up their equity.
Today's second steppers typically would have bought at the bottom of the market in 2009. But the average price for a first-time buyer home now is 31% higher. This means the average second stepper has an equity level of £87,096. That is 29% of the average price of a typical second stepper home (£304,963).
Not only have these first time sellers been helped by rising house prices boosting the amount of equity they have in their current home, their second homes are also more affordable than in previous years. When compared with earnings the average second step home is now 6.4 times UK gross annual average earnings down from 7.13 last year, according to Lloyds Bank.
However, it isn't all good news. If you want your second home to be a detached house, as many people do, you still have to find a significant amount of money before you can make the move. Lloyds Bank calculated that you would need to find an extra £128,390 to plug the gap between the sale price of your current home and the cost of that detached house you want to move to. Go for a semi-detached house instead and the gap falls to £17,864.
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Moving on up
Last year saw the highest number of first-time buyers enter the housing market in seven years, and this influx has only served to make second steppers more confident about their ability to sell.
House price rises are not only helping second steppers to move up the ladder, they are actually driving them to do so. One in three said that recent house price increases have encouraged them to move, with almost half saying that rises had improved their ability to move up the ladder.
Andy Hulme, mortgages director at Lloyds Bank, said that while the last few years had been tough for second steppers, they are now seeing a "much needed boost".
He added: "Whilst challenges remain as Second Steppers try to bridge the gap to the next rung on the ladder, a steady rise in property values in 2015 should further ease the constraint on many and this will have a positive knock-on effect for the whole of the housing market."
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