Should you leapfrog onto the next rung of the property ladder?

An ability to buy study found that the combination of low mortgage rates, rising wages and falling utility bills make now the best time to buy. Conditions were said to be last so favourable 13 years ago.

When you consider that the Centre for Economics and Business Research is predicting that UK house prices will continue to climb in the coming years, rising by three per cent in 2016 and four per cent the following year, getting as far up the property ladder as possible now would appear to be a wise decision.

While no one would advocate over-stretching yourself financially, the centre’s economists are warning that there may be a looming crisis not just for first-time buyers but for those hoping to move up to the second rung of the property ladder.

The price gap between a starter home and a larger family home is, say economists, widening, meaning the rungs of that metaphorical ladder could be moving further apart.

That could leave many people who bought as individuals or as part of a couple, but who want to upsize in the future as their family grows, stranded on the first rung.

With mortgage rates remaining low at the moment and an increasing number of lenders offering low deposit deals, some first-time buyers are opting to buy what would have traditionally been their second, or even their forever home first time round rather than choosing a starter home.

There are certainly advantages to this strategy for those who can afford it.

A bigger house could offer more scope for home improvements or an extension. Perhaps you might want to build an extension over a garage to add an extra bedroom in future or extend your kitchen into the garden to make a large open-plan kitchen-diner.

Aiming for the second rung of the housing ladder straight away also means you wont pay as much in fees and stamp duty than you may otherwise have forked out over a lifetime.

If you can perhaps live with an outdated kitchen or bathroom, for example, and save up for improvements as you go, then it could be possible to afford a larger home than you first thought.

However, there are caveats. Its vital to weigh up any risks. If house prices fall and you have a large mortgage on a more expensive property then you could find yourself in negative equity, where your home is worth less than your mortgage.

You also need to be honest with your lender, and yourself, about whether you could comfortably still afford your repayments if interest rates start to rise. Those who do go down this route may also find themselves having to cut back on luxuries such as holidays for a number of years.

But, for buyers who do decide that they want, and can afford, to leapfrog straight past the first property ladder rung, it could futureproof their property purchase.

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.

Martin Williamson is Head of Residential Property at Latimer Hinks Solicitors in Darlington. Latimer Hinks has a team of around 40 people serving private and corporate clients. For further information:http://www.latimerhinks.co.ukor call 01325 341500.