Home Affordability Improves For Second Steppers And Deposits Fall In The UK

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New research from Lloyds TSB has shown that the average price of a home has fallen by 10% since 2008. In addition, the average deposit was £70,540 in 2013, just 6% higher than in 2003 according to the report. Affordability for second steppers on the housing ladder has improved over the last year but has fallen over the last ten years.

The average price paid by a home mover has fallen by 10% over the last year, while home mover property prices actually grew nationally by 3%. London has seen the highest rise in house prices and the figures reflect this. Home movers in the capital put down the largest average deposit at 34% of the average property value, which amounts to approximately £126,528. In comparison, the price of the average deposit in Northern Ireland amounted to £36,912. This is also the lowest deposit price in the UK.

Despite the improvement in affordability, the average age of a home mover is now 40 years old whereas it was 37 in 2002. This indicates that many are still finding it difficult to raise the money for a deposit on a new home. The average mortgage advance for a home mover is now £142,046 whereas it was £101,472 over ten years ago. However, average mortgage repayment costs have fallen since their peak in 2007. Now, a home mover (those already on the property ladder) can expect to pay 31% of their average gross disposable earnings on mortgage repayments whereas, in 2007, home movers expected to pay 52% of their disposable income. House prices are currently lower than they were in 2007 despite the recent rises and mortgage rates have also decreased significantly therefore both factors are likely to have contributed to this improvement.

Despite the improvements for second steppers, many are still finding it difficult to afford to move. Several home buyers made their purchase during the house price peak in 2007 but, because of the decline in the housing market thereafter, may now be finding it difficult to make a second step on the property ladder due to low or negative equity in their homes. This could explain the rise in first time buyers when compared to second steppers. There are variations in home affordability between regions with the North being more affordable for second steppers.

This also means that sellers are more likely to sell their house fast in the North due to lower house prices. This of course plays into the hands of second-time buyers for whom it is an opportunity to take a step up on the property ladder.

Meanwhile the rise in first-time buyers can also be explained by the fact government schemes like the Right To Buy Scheme which make it easier for people with lower incomes to step on to the property ladder.

This activity on the housing market means the market is on the way to recovery, what’s more economists have confirmed there is no longer a risk of there being a property bubble.

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