34% of current homeowners who are looking to upscale their home in the next five years would find it difficult to take the next step up the housing ladder, according to research from MoneySuperMarket.
The research found that 26% of those looking to move to a bigger property think it will be difficult to make the leap, and a further 9% would find it very difficult. This rises to 41% of those aged between 35 and 54 years who would find it tough to upscale their current property, while 28% of 18 to 34 year olds think the same.
Kevin Mountford, head of banking at MoneySuperMarket, said: “There was a time when those in the 35 to 54 age group would have been looking to downsize, but now this is the age group where people are starting a family in some cases or still housing grown up children who are struggling to find their own way.
“Although they might have the earning potential to make that next step there is the constraint of mortgage term that comes with their age. Lenders will tend to fix the term of repayment to retirement age, so for those movers aged over 34 the repayments on increased value mortgages will be much higher as they’re paying it back over a shorter time. For example a £250,000 mortgage on the leading two year fixed at 1.05% could be taken out by a 30 year old with a 30 year term and the monthly repayments would be £810. However for someone aged 45, the same mortgage over a 20 year term would have monthly repayments of £1,155, that’s £345 extra to find each month to make that next move.”
Cash is the key reason property owners would find it hard to move on up. 47% of state house prices are so high they can’t afford to take the next step yet, while 43% simply can’t afford the cost of moving. Indeed, current homeowners think they’d need to save up £10,549 on average before they’d be able to move home. Unsurprisingly, Londoners estimate they’d need more in their savings pot (£12,946 on average), while those who own a home in the North East believe they’d need half as much (£6,772) to move property.
Mountford added: “Getting a foot on the property ladder in the first place can be hard work, but for many homeowners it’s just as difficult to take the next step. House prices have rocketed in recent years and tougher borrowing rules have made the search for a mortgage slightly harder. It is vital for a healthy housing market that people are able to move up the property ladder otherwise the whole system can come to a grinding halt, leading to a shortage of property. As a result, second steppers can’t afford to be complacent when it comes to deciding whether to upsize their home. Planning a budget will be crucial, and really taking the time to sit down and work out exactly what costs will be involved is essential.
“The good news for those looking to move is that there’s a great deal of competition in the mortgage market at the moment. We’ve seen a huge drop in fixed mortgage rates over the past few years, some with manageable fees. Perks such as free legal costs and free valuations on properties are also offered by some lenders in order to get customers through their doors. As such, there really hasn’t been a better time to get a mortgage.”
