The average FTB house in 2007 was bought for £167,417 with a £16,742 deposit. However, the average fall in house value of £7819 means they now only have £8,923 of their original deposit left. Assuming they have been making capital repayments on the mortgage for the past five years, these FTBs would now have paid off £14,600 of the loan, giving them a total of £23,521 equity.
When looking to move, the average house price now is £229,435, meaning a 10% deposit, as well as moving costs for stamp duty, conveyancers and estate agents amounts to £29,985, leaving a gap of £6,464 between their current equity and the amount of cash they need to move house.
The average second time buyer (STB), who first bought in 2007, also requires additional borrowing on their current mortgage of £55,817 in order to move into the average 2012 home. When they bought first time around, they borrowed an average of £150,675 – 3.42 times their household income of £44,000. However, the jump in asking prices between FTB and STB properties is greater than income inflation meaning they now need to borrow £206,492 – 4.2 times their income of £49,192.
As a result, an estimated 360,000 FTBs who bought in 2007 may be trapped in their first homes.
Ian Bartholomew, Senior Mortgage Product Manager at first direct said: “In a climate of falling house prices in many parts of the country, first time buyers can no longer rely on funding their next move with profits from the sale of their home. Those that haven’t taken steps to counter this may find that they can’t afford a deposit and the additional costs associated with moving, when looking to reach to the next rung of the ladder.
“For younger homeowners hopeful of moving to a bigger property in years to come, overpaying on their mortgage is the key to building up enough equity to enable their next move.”
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