A typical first-time buyer who bought in 2007 with a 10% deposit would have started with £16,000 equity. However much of this will have been eroded by the £11,000 fall in their property value, meaning just £5000 of their original deposit remains. Assuming they have been making capital repayments on the mortgage for the past four years, these FTBs would now have paid £11,000 off the loan, so would currently have £16,000 equity in their property – almost exactly the same as when they started.
However, the analysis shows that to move up the ladder and buy the average UK home, these second-time buyers need to raise £27,000 to cover the cost of selling their first home, raising a 10% deposit on the new home and pay for stamp duty. With just £16,000 in equity this is a shortfall of £11,000.
Pete Dockar, head of mortgages at HSBC, said: "These findings highlight the need to save or pay down an existing mortgage in order to fund that second step on the property ladder; first-time buyers can no longer rely on rising house prices to provide them with the deposit needed for their second purchase.
"Making overpayments on the mortgage is one way that these movers can help build up their finances to take the next step up the property ladder. This increases the equity in their first home, and bolsters the deposit available to them for their onward move."
* First-time buyers in Northern Ireland have been worst hit by price falls, with those who first bought in 2007 facing a 42% decrease in the value of their home, placing them in negative equity by £45,000;
* London is the only region where first-time buyer properties have risen since 2007 by 1.7%. However despite having £48,000 equity in their first homes, second-time buyers in London still face a £2000 shortfall to be able to buy the average London property;
* Second-time buyers in the South East face the highest moving gap on the UK mainland, with a shortfall of almost £18,000. This can largely be attributed to the cost of the average property in the region, which at £260,000 means a 3% stamp duty bill.
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