Second Steppers Return to Bank of Mum and Dad to Finance Their Next Step on the Property Ladder

    MANCHESTER, ENGLAND, June 17, 2012 /24-7PressRelease/ -- One in six second steppers, homeowners looking to sell their first home and move up the property ladder, are contemplating turning to the bank of mum and dad to plug the gap between the value of their first home and the cost of the house they would ideally move to, according to the latest research from Lloyds TSB.

- One in six (16%) second steppers are considering asking their family for financial support to make their next move on the housing ladder.
- The price difference between a typical first-time buyer home (a flat) and the house desired by many second steppers (semi-detached) is on average GBP41,000, and as high as almost GBP98,000 in Greater London.
- Over half (52%) of second steppers believe a shortfall or lack of a deposit will impact the purchase of their new house.

Lack of deposit holding second steppers back
A recent Lloyds TSB report highlighted that almost two thirds (62 per cent) of second steppers have wanted to climb up the ladder in the past 12 months but have been unable to do so as they face an increasing number of challenges. However, the latest research indicates that one of the main challenges is a shortfall or lack of a deposit, with over half (52%) of all those questioned agreeing that not having enough saved to cover the deposit is preventing them from taking the second step on the property ladder.

Bank of mum and dad remains open for business
The majority of second steppers will be hoping to use savings (61%) or equity in their current property (67%) to fund the move to their second property. However, one in six (16%) are also considering going back to their family to ask for financial support. The research revealed that two fifths (44%) of first-time buyers received help from someone for the deposit on their first property.

The average loan size first-time buyers received from family or friends the first time around reached almost GBP13,000 and many are looking for a similar amount again to help them move up the ladder (GBP12,746).

Cost of trading up soars 200% in 10 years
The additional capital needed by second steppers to trade up currently stands at an average of GBP41,000; an almost 200% (194%) increase on the GBP14,000 that was required 10 years ago.

Two thirds of current first-time buyers are currently living in flats (43%) or terraced houses (25%); with an average value of a flat at GBP148,502. Meanwhile, over half hope their next move will be to a three bedroom house. The average price for a semi-detached house currently stands at GBP189,312. This means that those looking to make this move face a 27% premium just to trade up, before adding on the cost of moving or the fact that there may be an equity shortfall in their current property. Since 2001, the average cost associated with moving home for someone who already owns a home rose by 69% (GBP3,632) from GBP5,290 in 2001 to GBP8,922 in 20111.

In percentage terms, second steppers in the south east face the biggest premium to trade up at 52%, and will need almost GBP85,000 to trade up from the typical first property to their second home. Londoners will need to find GBP97,916 to fund the same gap, although the premium across the capital is only 27%. Second Steppers in Wales need the lowest deposit with the cost of trading up at just over GBP6,000.

Stephen Noakes, Mortgage Director, Lloyds TSB says:
"We already know that second steppers face a number of tough challenges, and in many ways have been the hardest hit by the subdued housing market, so it is unsurprising that they are struggling to fund the gap needed to trade up to their preferred second home.

"Parents have long been helping to fund their children's first home, but many are now having to provide further support as they move up the ladder. This indicates that these customers still need attention and support. To achieve a sustainable housing market we need to see movement throughout the market. If second steppers get stuck on the first rung, movement at the bottom half of the ladder comes to a standstill."

- Data has been sourced from the Land Registry and all price figures refer to the arithmetic average of house prices. The data covers the Quarter 4 for the period between 2001 and 2011.

Crown copyright material is reproduced with the permission of Land Registry under delegated authority from the Controller of HMSO.

Viewers of this Information are granted permission to access this Crown copyright material and to download it onto electronic, magnetic, optical or similar storage media provided that such activities are for private research, study or in-house use only. Any other use of the material requires the formal written permission of Land Registry which can be requested from us, and is subject to an additional licence and associated charge.

- All other data is based on Second Steppers consumer research undertaken by BDRC Continental (bdrc-continental.com) on behalf of Lloyds Banking Group. Fieldwork took place in January 2012. Around 400 interviews were collected from a representative online consumer panel. BDRC Continental also conducted in-depth telephone interviews with around thirty 2010/2011 Second Steppers which took part in the research last year.

Offering a solution

Addressing the challenges faced by those looking to move home, but suffering from either a reduction in equity or difficulty raising the deposit, Lloyds TSB offers the Equity Support Scheme and Lend a Hand Home mover.

The Equity Support Scheme

The Equity Support Scheme makes moving home possible for Lloyds TSB customers with low or negative equity, it is designed to maintain momentum in the market. It allows borrowers to move to a property of the same value, buy a bigger home or downsize. Customers can move without increasing their existing levels of borrowing and channel any additional funds in to their new home.

Like for like property
Current mortgage: GBP150,000
Current property worth: GBP140,000
Current LTV: 107%

Lloyds TSB customers in this situation would be able to move to a new home, also worth GBP140,000, with their existing product rate as the LTV would be maintained at 107%.
This is likely to be a solution for people looking to move location rather than get more space.

Trading up
Current mortgage GBP130,000
Current property worth GBP110,000
Current LTV 118 %
New property worth GBP120,000
New mortgage GBP130,000
Additional customer deposit GBP10,000
New LTV: 108 %

Customers looking to move to a bigger property will no longer be prevented from moving because they're in negative equity. Borrowers will still be required to make an additional deposit rather than increasing their existing borrowing. However, the scheme will allow them to direct their savings towards the new property rather than plug the negative equity gap.

This will then move the borrower and the lender into a stronger equity position, as the LTV level will reduce as a result of moving to a more expensive property.

This product will allow Second Steppers with a mortgage from Lloyds Banking Group to move to a bigger property, getting the market moving again.

Lend a Hand Home mover
The Lloyds TSB Lend a Hand Home mover product allows borrowers to take out a mortgage with a deposit of just 5%, but can access a rate that is the equivalent of products available for borrowers with a much larger deposit. This is because their funds are backed up with the savings of a helper, such as a parent, grandparent or other family member. At the same time, their helper benefits from a competitive savings rate as a legal charge is taken over the savings to offset the risk. No other major lender offers deals for new customers moving house unless they have a deposit of at least 10%.

Website: http://www.lloydstsb.com

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