Second steppers need financial help to move up property ladder
Many home owners in the UK ready to take their second step on the property ladder now rely on financial help from family and friends to help make the jump from their first home, new research has found.
Some 33% of second steppers are having to borrow from family and friends to trade up the property ladder, up from 27% last year, according to the latest Lloyds Bank research.
The average amount that second steppers expect to borrow has increased by £4,219 compared to last year to £25,450, despite 57% having already received financial support for their first property worth an average of £19,824.
In addition, 58% say they wouldn’t be able to make their next move up the home-owning ladder without generous family and friends coming to the rescue.
Some 62% use equity from current property and 39% personal savings but 22% of second steppers will mainly look to borrow from the Bank of Mum and Dad to raise the deposit required to fund their next move. Some 13% said they would seek help from grandparents and 6% from friends.
Where second steppers look to borrow from the Bank of Mum and Dad, parents have had to make sacrifices. Some 54% will raid their own savings to provide help and 48% of these plan to downsize to release more equity to support their kids.
Two fifths also plan to remortgage to raise money to give to their children so they can trade up the property ladder, 29% also said they will sell another property to help and 19% said they would sacrifice holidays or hobbies in order to support their offspring.
But movers are also planning to make sacrifices to sell their first home and achieve their second property aims. Some 28% of second steppers have said that they will have fewer children than originally planned due to the challenges they have faced whilst trying to make the next move. This is up by 16% from last year. More second steppers are also delaying having children due to the difficulties faced.
‘Support from generous family and friends remains vital in helping second steppers in taking the next step on the property ladder, despite more second steppers now feeling optimistic about the housing market,’ said Andrew Mason, mortgage products director at Lloyds Bank.
‘We continue to see parents make big sacrifices as their children return for help with housing for a second time. However, to ease the burden on parents, we are seeing more second steppers plan ahead for their next big move by saving and paying more to their mortgage,’ he added.
The research also shows that although today’s second steppers need to borrow more from family and friends, 40% say that conditions have improved since last year. There has also been an increase in the number of second steppers who are saving to support their next move, with 67% saying that they are making regular contributions to their savings, a slight increase from the 61% last year.
The number of second steppers overpaying their mortgage to help increase equity has also increased from 41% to 47%.
The gap between the sale of a second steppers’ current property and the cost of the home they are looking for, usually a detached property, is now £135,985. However, the average equity level of £85,877 can help reduce this gap by 63%, meaning that second steppers need to add an extra £50,108 to their existing mortgage.
However, finances is not the only thing stopping second steppers with 26% saying they cannot find the right property and 25% saying that there is a lack of affordable property available.
These, and other factors, resulted in six in 10 second steppers wanting to make the move last year not being able to do so which will have an impact on the number of properties available to first time buyers.