by Mark Johnston
Second Time Buyers Face problems Too!
While the plight of first time buyers has featured heavily in the news of late, it also appears that they are not alone as second steppers now also face difficult times.
Figures published recently have shown that home affordability for second steppers is far worse than it is for first time buyers.
According to the latest figures from Lloyds TSB, home owners who are planning to take their second step on the property ladder are currently facing the worst market conditions for a quarter of a century.
The difficulties they are facing are not only in terms of obtaining a mortgage, but also because the equity they once held in their first property has been eroded since the recession began.
Suren Thiru, housing economist at Lloyds TSB, stated that “it is very concerning that the challenges facing those attempting to take their second step on the housing ladder are the toughest for more than a generation”.
The average second time buyer who first bought in 2007, which equates to around 360,000, now requires additional borrowing on their current mortgage in order for them to move on to the second rung of the housing ladder in 2012.
Current research shows that the average cost for a first time buyers house in 2007 was around £167,417 with a £16,742 deposit. However the average fall in house value is around £7,819 which means they now only have around £8,923 of their original deposit left, this is providing they have not add anything else to their original mortgage amount.
First direct, the online bank, found that on average second time buyers need to raise an additional £6,464 for a deposit and then borrow an extra £55,817 before they can move in to their next property.
Therefore as a result of this the first time buyers who bought in or around 2007 may be now trapped in their first homes.
Therefore in a climate of falling house prices in many parts of the country first time buyers can no longer rely on rising house prices as they have previously done, to provide them with the deposit now needed for their second purchase.
Ian Bartholomew, senior mortgage product manager at first direct suggests that “younger home owners hopeful of moving to a bigger property in years to come, should realise that overpaying on their mortgage is the key to building up enough equity to enable their next move.
Mark Harris, from mortgage broker SPF Private Clients, added “home owners can no longer rely on the uplift in equity to absorb costs such as stamp duty, legal and surveyor fees and mortgage costs”.
In conclusion, the current problems facing second steppers have serious implications for the wider housing market, thus creating a bottleneck that significantly limits the number of homes available to first time buyers as well as stopping many home owners who need to move.
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