Why are second steppers – those buying their second property – increasingly relying on the Bank of Mum and Dad? Tepilo investigates.
We hear plenty about first-time buyers relying on the Bank of Mum and Dad to help them take their first steps on the property ladder, but new research has now revealed that second steppers – people buying their second home – are also depending on financial help from family and friends to make their next move.
The latest ‘Second Steppers’ report from Lloyds Bank found that a third (33%) of homeowners are having to turn to family and friends to trade up the property ladder – up from 27% last year.
Financial support needed to move upwards
Many homeowners eager to take their second step on the property ladder are requiring financial assistance from their mum and dad, grandparents or friends to make their dreams achievable.
As well as an increase in the number of people requiring financial help, there has also been an uplift in the average amount second steppers need to borrow – up by more than £4,000 on last year to reach £25,450. This is despite 57% of second steppers already receiving financial support for their first property to the tune of an average of £19,824.
To further highlight the scale of the issue, it was revealed that almost three-fifths (58%) of second steppers said they wouldn't be able to make their next move up the home-owning ladder without the aid of generous family and friends.
Equity, personal savings and support from parents
When asked how they will fund their next move, second steppers pointed to a combination of possible revenue sources, including equity in their house (62%) and personal savings (39%). For 22% of those surveyed, though, the main reliance will be on the Bank of Mum and Dad to fund the deposit needed to bankroll their next move. Some 13% will also ask their grandparents to support them, while some (6%) will even turn to friends.
Parents have to make sacrifices to help out their offspring, with more than half (54%) having to raid their own savings to help their second stepper children, while just under half (48%) plan to downsize to release more equity and support their kids.
Furthermore, two fifths plan to remortgage to raise the funds to give to their children so they can move up the property ladder. Some 29%, meanwhile, said they will sell another property to assist their kids, while almost a fifth (19%) said they would sacrifice holidays or hobbies to help support their children.
Second steppers must make sacrifices too
Those moving up the property ladder also need to make sacrifices to help them sell their first home and own their second property.
Some 28% of second steppers said they will now have fewer children than originally planned due to the obstacles they have faced while trying to trade up, a rise of 16% from last year – highlighting the impact the difficulty in moving homes is having on family planning.
As well as having fewer children, more second steppers are also delaying having kids because of the difficulties they face.
A rise in optimism
Despite the challenges they face, and the fact that today's second steppers often need to borrow from family and friends to fund their next house move, they are feeling more optimistic about the housing market.
Some 40% say that conditions have improved since last year, while second steppers are trying to ease the burden on their parents by planning ahead for their move up the property ladder.
There has been a rise in the proportion of second steppers who are saving to support their next move, with 67% making regular contributions to their savings, up from 61% last year. There has also been an increase in the number of second steppers who are overpaying on their mortgage to help increase equity – up from 41% to 47%.
The research also found that the distance between the sale of a second steppers' current home and the cost of their dream home – normally a detached property – is now £135,985. Nevertheless, the average equity level of £85,877 can help trim this gap by 63%, meaning that those looking buy their second property need to add an extra £50,108 to their existing mortgage.
Other obstacles in the way
Financial issues aren't the only thing stopping second steppers. Sourcing the right home remains a major problem, with more than a quarter (26%) saying that they have not found the right property yet and 25% complaining that there is a lack of affordable property available.
These factors, and others, are preventing second steppers from trading up, with six in ten who wanted to make the move last year unable to do because of the issues outlined above. If second steppers can't move with ease, this has an impact on the number of properties available to first- time buyers.
For a properly functioning property market, second steppers need to be able to trade up, in turn freeing up homes for people buying their first property. Preferably, they also wouldn't have to rely on financial assistance from the Bank of Mum and Dad to achieve it.
The research makes for slightly worrying reading, but the fact that second steppers are feeling optimistic about the market and the fact that they are planning ahead for their move by saving and overpaying on their mortgage is more promising.