New Lloyds TSB report finds People are Trapped in their First Homes

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Second Steppers hardest hit by subdued housing market.

Lloyds TSB For The Journey

For The Journey

Lloyds TSB has today launched its annual ‘Second Stepper’ report which tracks the ongoing plight of first time sellers amid a challenging housing market. The report reveals that home affordability for Second Steppers has become much less favourable and declining house prices have led to equity shortfalls for many.

Second Steppers are homeowners looking to sell their first home and move up the ladder. Many potential Second Steppers in today’s market would have bought close to the peak of the market and are now finding it increasingly difficult to get off the ‘first rung’.

According to Lloyds TSB’s report, almost two thirds (61 per cent) 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. More than one in five (22 per cent) believe it is now harder to move up the ladder than get on it in the first place, with almost half (43 per cent) also feeling it will be as equally difficult.

The report also revealed general pessimism about the future of the housing market; a third (34 per cent) believe it is going to be harder to sell their property this year than last, with over half (53 per cent) predicting that the housing market will not improve this year.

Second Steppers face more challenges than first-time buyers. A lack of affordable property to buy (35 per cent) and a lack of offers from potential first time buyers (32 per cent), were cited as key barriers delaying the sale of people’s current property on top of a whole host of other challenges.

Stephen Noakes, Mortgage Director, Lloyds TSB explains:
"First time sellers are now faced with some very tough challenges when trying to make their next move on the property ladder and many are finding it more difficult than getting on the ladder in the first place. 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.

“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.”

Calling for more support

More help is required to support this important segment of the housing market. Almost three quarters (72 per cent) of respondents are calling on the Government to take action to help those trying to sell their first home and almost half of respondents (49 per cent) would like to see their mortgage provider offer new products to help them overcome some of these challenges.

But, many first time sellers have being taking action to help improve their situation. Almost two thirds (58 per cent) have been saving to help fund their next move and over one in four (27 per cent) have also been overpaying on their mortgage to help build up their equity.

Offering a solution

Addressing the challenges faced by those looking to move home, but suffering from either a reduction in equity or difficulty raising the deposit, Lloyds TSB offers the Equity Support Scheme and Lend a Hand Homemover.

The Equity Support Scheme makes moving home possible for Lloyds TSB customers with low or negative equity, it is designed to maintain momentum in the market. It allows borrowers to move to a property of the same value, buy a bigger home or downsize. Customers can move without increasing their existing levels of borrowing and channel any additional funds in to their new home.

The Lloyds TSB Lend a Hand Homemover product allows borrowers to take out a mortgage with a deposit of just 5%, but can access a rate that is the equivalent of products available for borrowers with a much larger deposit. This is because their funds are backed up with the savings of a helper, such as a parent, grandparent or other family member. At the same time, their helper benefits from a competitive savings rate as a legal charge is taken over the savings to offset the risk. No other major lender offers deals for new customers moving house unless they have a deposit of at least 10%.

Lloyds TSB ‘Second Steppers panel’ - last year’s Second Steppers offer advice to 2012 home movers:

Build up your savings as much as you can – you may need a higher deposit than you think and may need to take into account a fall in your equity position

Be flexible, you will need to be prepared to lower your offer, or even look into renting your property rather than selling it

Present your house to its best: declutter and redecorate – fix any problem areas prior to viewing
Explore alternative ways to sell your property, such as private buyers or auction. This could save you money but will also open up your options

Keep at it and be patient, it may take a while for you to sell your house, but there will be a buyer out there

Stay enthusiastic

Raising a new deposit– the majority (71 per cent) of second-time buyers areconcerned about the higher levels of deposit needed for their second property often because of a lack of equity, with 36 per cent admitting that the lack of any deposit is the main problem they face in climbing up the ladder. The average deposit for a typical Second Stepper in 2011 was £60,670 more than double the average deposit required in 2001 (£24,783).

Decline in the level of equity – the average house price paid by a first-time buyer has reduced by £32,815 since the typical Second Stepper bought their first home.

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Claire Barratt
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