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First-time buyers: can you actually afford to buy a bigger home?

'Second steppers' need more than £130,000 to upgrade to a detached house

First-time buyers: can you actually afford to buy a bigger home?

First-time homeowners hoping to upgrade to a detached property need to find an extra £50,000, even taking into account the equity in their current home, according to figures from one of the UK’s biggest banks.  

New research from Lloyds Bank highlights the challenges faced by ‘second steppers’ as they look to move to a bigger home.

Making the move up the ladder from what’s considered to be a first-time buyer property – often a flat or semi-detached house – and a detached property is now thought to cost more than £130,000 on average.

But the figure can be significantly higher in some parts of the country. In London, for example, a first-time buyer would need to find an incredible £330,000 to move to a detached property.


How the price gap is calculated

First-time homeowners need to bridge a gap of £135,985 to move to a detached home, according Lloyds Bank.

People looking to move this year, termed ‘second steppers’, will generally have bought their homes in 2014, meaning they can benefit from an average increase in the equity they own in a property of £85,877.

That means movers will still need to find an additional £50,108 to buy a larger home.

How expensive is a detached property?

The difference in cost between an average first-time buyer property and a detached home varies significantly around the UK.

In Northern Ireland, for example, homeowners need to find £73,499 to move to a detached property. In London this figure is a remarkable £330,599.

The chart below shows the price gaps facing second steppers around the UK.

How much equity do you have in your home?

This year’s group of second steppers bought their first home in 2014, when the average price of a first-time buyer property was £167,137.

Based on these homes now being worth £211,296, house price rises, coupled with deposits and capital repayments, mean owners enjoy an average equity boost of £85,877 – or 63% of the amount needed to upgrade to a detached home.

As the table below shows, 2018’s second steppers are better off than those five years ago, but significantly worse off than last year’s movers.

 Year Price gap between FTB home and detached home Average equity levels Equity as % of price gap Difference between equity level and cost of second home
2013 £115,067 £52,188 45% £62,879
2014 £114,417 £68,629 60% £45,788
2015 £119,439 £81,366 68% £38,073
2016 £118,330 £99,428 84% £18,903
2017 £123,384 £102,323 83% £21,061
2018 £135,985 £85,877 63% £50,108

Is now a good time to move?

Lloyds also surveyed 505 first-time buyers about their views on the property market.

While first-time sellers are generally positive about the housing market, they consider potential interest rate rises to be their biggest challenge as they attempt to upgrade to a bigger home.

One in three (35%) households believe it’ll be harder to sell their home in 2018, with economic uncertainty, deposit sizes and a housing shortage cited as the main barriers.

This means that some respondents are instead looking to renovate their current property rather than trying to sell it – 40% say they’ll considering home improvements in 2018, up 6% on last year’s figures.

The town or the countryside?

Given the popularity of the Help to Buy scheme, more than a third of second steppers (36%) say they’d like to move to a new-build home.

New homes come second only to period properties, which are preferred by 37% of homeowners.

Nearly half of second steppers say they’d prefer to move to a town (48%), while just under a third (31%) yearn for a slower pace of life in the countryside.

Property regrets

Almost two thirds (64%) of first-time homeowners said they had regrets about buying their property, with more than a third saying they wished they’d have bought a bigger home.

Just over one in 10, meanwhile, admit to rushing to buy a home before properly doing their research.

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