32% of homeowners looking to take their second step on the property ladder think they will still rely on financial help from family and friends to move up the property ladder, according to the latest Lloyds Bank second steppers report.
So-called ‘second steppers’ plan to raise the deposit required for their next move by borrowing money not just from the ‘Bank of Mum and Dad’ (17%), but also grandparents (9%) or friends (6%). Of those who require financial help from their parents, 47% believe that their parents have had to make sacrifices in order to help them move up the property ladder.
The price difference between a typical first time buyer home and a second stepper’s ideal home – typically a detached property – is £126,000. However, the average equity level of £105,068 from the sale of their first home can help to reduce this gap by 83%, meaning that second steppers need only add an extra £21,005 to their existing mortgage.
In order to get the deposit for their next move, the majority of second steppers plan to use the equity from their current property (63%), while 41% will plunder their savings. And those considering turning to family members to help them out (26%) are typically looking to borrow more than £20,000. 35% of these second steppers felt that they wouldn’t be able to make the next move on the property ladder without this financial assistance.
The research revealed that 50% also required help with the deposit on their first property. The average loan size first time buyers received from family and friends the first time around reached £21,512, only slightly more than they are hoping to borrow again (£21,231) from parents or grandparents to take the next step on the housing ladder.
First time sellers have stated that they will have children later in life than originally planned (23%) or have fewer children than originally planned (12%) whilst they experience the challenges that first time sellers face. While 56% said that the challenges had no impact on their social or personal circumstances, 13% have had to, or will have to, change their career as a result.
One in four second steppers think it’s now harder to move up the property ladder than to get on it in the first place. As such, 41% have been overpaying their mortgage to increase their equity and 34% have increased the amount that they save every month. The research also revealed that 65% have either continued to save or started to save since they moved into their first property.
Andy Mason, mortgage director at Lloyds Bank, said: “Parental support continues to play a vital role in helping young people to get on the property ladder. However, it is clear that despite improved conditions for this part of the housing market, second steppers will still rely on the ‘Bank of Mum and Dad’, with hard-pressed parents being once again called on for financial help. Without this extra financial support, second steppers believe that they wouldn’t be able to make the next move on the property ladder for some time.
“However, it is encouraging to see many second steppers planning ahead by overpaying their mortgage and making bigger contributions into savings accounts to prepare for when the perfect home becomes available.”
Just under a third (32%) of second steppers said that not finding the right property remains the biggest issue that may delay the sale of their current property. Lack of affordable property (26%), the cost of stamp duty tax (24%) and potential changes to interest rates (22%) are other notable issues on second steppers’ minds as they plan their next move.
Similar to the challenges faced by all second steppers, the size of deposit required (29%), tighter lending criteria (28%) and potential interest rate changes (28%) are the key issues first time sellers face. Other challenges also include a low supply of family sized properties on the market (27%), concerns over the economic environment (26%) and the cost of moving (25%).
