Online estate agency Tepilo analyses why second steppers are becoming equally reliant on financial assistance from the Bank of Mum and Dad.
New research has revealed that second steppers – as well as first-time buyers – are relying on financial assistance from the so-called Bank of Mum and Dad to help them buy a home.
Second steppers are existing homeowners who are looking to move up the property ladder – in other words, from a starter home to a bigger abode or a new-build flat to a family-sized semi-detached. They are, in the simplest terms possible, taking their second steps on the property ladder by purchasing a home for the second time.
But, given current market conditions, even existing homeowners are relying on parental help to purchase a new property. According to research carried out by Lloyds Bank, nearly a third of existing owners believe they will still rely on financial help from family and friends to progress up the property ladder.
As such, 17% of second steppers would need to borrow money from the Bank of Mum and Dad to fund their next house purchase, while 9% would turn to grandparents and 6% to friends for assistance with raising the necessary deposit.
Of those who need a financial boost from the Bank of Mum and Dad, 47% think their parents have had to make sacrifices to help them move up the property ladder.
As you would expect, there is quite a marked difference between the cost of a first-time buyer home and a second stepper one. The report suggests that the price difference between a typical first-time buyer property and a second stepper's ideal home – usually a detached property – is £126,000.
Of course, the money raised from selling their first home – with the average equity level currently just over £105,000 – reduces that gap considerably, but second steppers are still struggling to make up the shortfall, just as first-time buyers are struggling to cobble together a deposit.
The research also revealed that half of all those surveyed needed help with the deposit on their first property too, meaning that this type of buyer has relied on the Bank of Mum and Dad as a first-time purchaser and a second stepper. The average loan received first time around by second steppers was £21,512.
The challenges of moving up the property ladder also put on hold major life goals for many, with nearly a quarter of first-time sellers putting off having children until they have sold their first home.
Commonly, one of the main reasons for moving out of a starter home is to start or raise a family, which generally requires a larger property or more bedrooms. Given the difficulties of buying a home in the first place, and then moving up the property ladder once you do own, 23% of first-time sellers stated that they will have children later in life than originally planned, while 12% said they will have fewer children than originally planned while faced with the challenges that first-time sellers have to contend with.
By contrast, 56% said that the challenges of selling for the first time had had no impact on their social or personal circumstances. On the other hand, 13% said they have had to, or will have to, change their career as a consequence.
Meanwhile, just below a third of second steppers said that the inability to find the right property is delaying the sale of their first home. A lack of affordable homes (24%), the cost of stamp duty (24%) and possible changes to interest rates (22%) are all other reasons why second steppers are finding it difficult to sell their current home and move up the property ladder.
For a property market to be functioning smoothly, and properly, second steppers need to be able to move on from their starter homes, in turn freeing up stock for first-time buyers. If second steppers are finding it difficult or too expensive to move upwards, this has a negative impact on the first-time buyer market. What's more, third, fourth or fifth steppers and downsizers – the demographics likely to be selling their homes to second steppers – will also be impacted if too many second steppers are deterred.
While the struggles of the first-time buyer market have been widely document – and rightly so – other parts of the market shouldn't be forgotten. The fact that second steppers are having to rely on the Bank of Mum and Dad isn't a glowing endorsement of the current housing situation in the UK, and more needs to be done to improve the situation of all buyers and sellers if the UK housing market is genuinely to be ‘fixed’.