by Mark Johnston
Housing Market Stuck on Second Step.
It appears that life may becoming easier for first time buyers.
Richard Sexton, director of e.surv chartered surveyors, stated that “although deposit requirements are still high, rates are lower and banks are more willing to lend to lower income borrowers”.
However, according to growing evidence a new bottleneck has emerged within the housing market as people looking to buy their second homes are either trapped in either negative or they are struggling to raise a big enough deposit.
Figures have revealed that approximately 30 per cent of home owners are in negative equity.
Since the typical second stepper bought their first home in the peak of 2007, the average price paid by first time buyers has dropped by around £20,095 meaning that the falling house prices has pushed many home owners in to negative equity.
Therefore the entire housing market is facing a ‘logjam’ as home owners can not afford to move up the property ladder.
A recent survey by Lloyds TSB found that 61 per cent of second steppers have been Stuck on the property ladder for 12 months. Many of these second steppers believe that currently it is harder to move up the ladder than to get on it.
Second steppers are home owners who are looking to sell their first home in order to move up the property ladder. Many of the second steppers in today’s market bought their first property in the peak of the market.
The problem with this is that if second steppers get stuck on the first rung the movement at the bottom of half of the ladder also comes to a standstill. This not only restricts the supply of starter properties but it will also have a knock on effect across the whole of the housing market.
It seems that home affordability for first time sellers is at its least favourable level for over 25 years.
It is no wonder then that many experts feel that the housing market has now reached a ‘crucial stage’ in its tentative recovery.
Stephen Noakes, Lloyds TSB mortgage director, says “it is vital that this group of home movers receives more support and attention, as they play an intrinsic role in getting the housing market moving again”.
According to a study three quarters of struggling second steppers would like to see more support from the government.
With this in mind ministers are now planning to extend the governments offer to underwrite mortgages for people struggling to buy a home from first time buyers to second steppers in order to get the housing market moving again.
Therefore the Department for Communities and Local Government (DCLG) is currently working on a package that will offer help to second steppers by extending the New Buy scheme.
The New Buy scheme was launched last year and it enables people to buy a new build home with just a 5 per cent deposit.
In conclusion many experts believe that to achieve a sustainable housing market we need to see movement throughout the market.
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