04 March 2017

  • Increased equity on first home helps reduce second home funding gap by £100,000 to £20,000
  • Despite this, one in three ‘Second-Time Buyers’ say it will be more difficult to sell their home this year
  • Over a third consider improving rather than moving, creating supply shortage for First-Time Buyers
  • Improved home affordability, record low mortgage rates, increased house prices and equity should favour Second Steppers, but uncertainty reigns

Despite improved conditions for homeowners ready to take their second step on the property ladder, an increasing number think it will be harder to sell their home this year, partly due to concerns over the economy - according to new research from Lloyds Bank.

Lloyds Bank has today launched its annual Second Stepper report which tracks the ongoing plight of First-Time Sellers. The report reveals that while market conditions have significantly improved over the past six years, buyers and sellers face fresh frustrations and lack of confidence in moving to the next step.

Second Steppers are mostly couples and young families moving on from their first-time buyer flats to secure more space and a garden. Many had previously found themselves stuck in their starter home with little or no equity as the economic downturn took hold – but the latest figures show that conditions for this group have improved as they prepare to take their next step on the property ladder.

Second Steppers sitting on equity windfall of over £100,000

Higher house prices have increased the equity of those still living in their first homes, with 45% feeling that their equity position has improved over the last year.

Today’s typical Second Steppers bought their first property in 2012, when the average price of a First-Time home was £140,004. Based on the latest house price figures, selling their home now for the average First-Time Buyer house price of £205,723 would provide them with an average equity of £105,068* – around two-thirds of which has been boosted by house price growth over the last four years, with the rest coming from the initial deposit and mortgage repayment.

This average equity of £105,068, which has more than quadrupled from just £23,643 four years ago, is equivalent to roughly a third (32%) of the average price of a typical three-bedroomed detached Second Stepper home (£331,796).

The findings show that the gap between the sale price of their current property and the cost of their ideal home – typically a detached property – is £126,000. However, the average equity level of £105,068 from the sale of their first home can help to reduce this gap by 83%, meaning that Second Steppers need only add an extra £21,005 to their existing mortgage.

Other factors have also improved for Second Steppers, including record low mortgage rates and better home affordability. Higher levels of equity built up in the past four years have contributed to home affordability for First-Time Sellers improving from 7.2 times UK gross annual average earnings in 2012 compared with 6.6 in 2016.

Second-Time Buyers expecting it to be hard to upsize this year

Despite these favourable conditions, two out of five (39%) Second Steppers recently surveyed think it will be more difficult to sell their existing property this year compared to 12 months ago, versus just one in five (18%) in 2015. Around one in three (34%) are also considering staying put and improving their homes rather than moving.

The report reveals that over a quarter (26%) are worried about the uncertain economic climate, deposit size remains a key challenge (29%) and a third (32%) of these new and growing families are struggling to find the right property.

Andrew Mason, Lloyds Bank Mortgage Director, said: “Second Steppers are yesterday’s First-Time Buyers and the conditions to help them climb to the next rung on the property ladder are better than they’ve been for over four years. Despite this, many still feel that things are tough out there and that it’s getting more difficult to sell your first home and move up the ladder.

“Second Steppers are telling us that finding the right property can be tough, and because of that, they’re delaying their move. However, if too many Second Steppers hold out for a long time for their ‘dream home’ this could reduce the availability of homes for First-Time buyers and slow the market.”

Property choice for Second Steppers: Family sized ‘forever’ home

Moving to a period property is favoured by over a third of Second Steppers (35%), with nearly the same number (34%) seeking a new build. The survey also found that a quarter (26%) of prospective buyers want to move to a recently developed or renovated property, while just under a fifth (18%) are willing to do the hard work themselves and are looking for a renovation project.

The ‘must-haves’ topping the list for any Second Step property are; a driveway or off-road parking (62%); a garden (59%) and a kitchen -  diner (59%). A garage or double garage is something that half (51%) of Second Steppers desire. Town life appeals to half (48%) of Second Steppers, while two in five (39%) prefer a quieter village life. Less than a third (30%) are looking to be city dwellers and a quarter (24%) are looking to move to the countryside.

Reasons for moving

Although the size of their current property was the main reason (63%) for considering a move, Second Steppers appear to be in no rush unless it’s to their dream second home.

Two in five (39%) stated their current home is too small for their needs and under a fifth (17%) wanted to move to a new area.

Over two thirds (67%) of Second Steppers have changed their reason for moving since they initially considered the move, with family being the main factor. A third (32%) originally sought more space but now need to move to accommodate a growing family, while a fifth (20%) now want to move to be nearer good schools.