Posted on 30th January 2013

Plight of the "Second-Steppers"

Martin Williamson, Head of Residential PropertyBy Martin Williamson, Head of Residential Property, Latimer Hinks Solicitors www.latimerhinks.co.uk.

According to a new report, growing numbers of families are struggling to reach the second rung of the housing ladder and are stuck in houses that are too small as they cannot afford a larger property. While the typical so-called second stepper bought their first home around five to six years ago, and is now aged 40 years old, the stalling market has seen many left with little or no equity in their homes.

The report by Lloyds TSB paints a stark picture of the fortunes of those languishing in starter homes that are often too small for growing families. The Bank estimates there were around 319,000 home movers in 2012, which is broadly the same as the previous year. However, second-steppers hold enough equity to cover only 7 per cent of the price of a typical home, compared with 42 per cent in 2005.

The typical potential second stepper in 2012 would have bought their first home in 2008. Such a homeowner is, on average, estimated to have an equity level of just £11,500, equivalent to 7 per cent of the average price for a semi-detached house (£162,170). With the average cost of moving estimated at close to £9,000, this level of equity leaves very little to put down as a deposit on the next home.

In addition, there are also many potential second steppers who bought at the peak of the market in 2007. Many of these homeowners are likely to be in an even worse financial position, often with negative equity. This situation together with the high costs of moving means that many growing families will have to remain in cramped accommodation for years ahead.

While many second-steppers wont have bought at the peak of the housing market boom, they are still struggling to afford to move up the housing ladder. This lack of fluidity in the housing market represents a further barrier to those looking to take that all-important step on the first rung of the ladder. If increasing numbers of second-steppers are unable to move up the ladder, first-time buyers will also have fewer opportunities to buy their first property.

The report comes after planning Minister Nick Boles said that more houses must be built or home ownership risks becoming the exclusive preserve of people with large incomes or wealthy parents. More house building is to be advocated, as are more widely available schemes to encourage second steppers, and first-time buyers, to move up or on to the housing ladder. Whether these are schemes tailored to first-time buyers, such as FirstBuy or those aimed at all such as NewBuy, or else part exchanges, any moves to encourage fluidity in the housing market are to be supported, and applauded.

Please note: This article is intended as guidance only and does not constitute advice, financial or otherwise. No responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by Latimer Hinks. In addition, no responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by the firm.