Second Steppers are homeowners looking to sell their first home and move up the ladder. Many potential Second Steppers in today’s market would have bought close to the peak of the market and are now finding it increasingly difficult to get off the "first rung".
According to Bank of Scotland’s report almost two-thirds (65%) of Scottish 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. More than one in four (27%), believe it is now harder to move up the ladder than get on it in the first place, this compares to one in five (22%) for the UK as a whole. Almost half (44%) in Scotland also feeling it will be as equally difficult to make this move.
The report also revealed general pessimism about the future of the housing market; almost half of Scots (45%) believe it is going to be harder to sell their property this year than last, with over half (56%) predicting that the housing market will not improve this year.
A lack of offers from potential first-time buyers (40%) and a lack of affordable property to buy (31%), were cited as key barriers delaying the sale of people’s current property on top of a whole host of other challenges.
* Raising a new deposit – the majority (65%) of second-time buyers in Scotland are concerned about the higher levels of deposit needed for their second property, often because of a lack of equity, with 31% admitting that the lack of any deposit is the main problem they face in climbing up the ladder. The average deposit for a typical Scottish Second Stepper in 2011 was £60,670 more than double the average deposit required in 2001 (£24,783);
* Decline in the level of equity – the average house price paid by a first-time buyer in Scotland has reduced by around £29,000 (£28,942) since the typical Second Stepper bought their first home, meaning almost one in five (18%) of Second Steppers do not have enough equity in their current property to move. In Scotland 26% of Second Steppers are in this position. Bank of Scotland has estimated that the typical Second Stepper in Scotland will be in a positive equity position of just £4000 (£4034);
* The cost of moving hits four-year high – general fees and charges associated with moving home (44%) was cited as one of the main challenges for those in Scotland. The cost of moving house for a home mover in Scotland stood at an average of £6972 in 2011 – an increase of 69% (£2847) compared to 2001. This is the highest cost since the peak of the housing market in 2007 and more than three times higher than for first time buyers (£3119);
* Decline in affordability – home affordability for first-time sellers in Scotland is at its least favourable level for over 25 years and is now less favourable than for those entering the housing market for the first time. The Bank of Scotland housing affordability measure – calculated as the average price of a typical second stepper home, less their current equity position as a ratio of average earnings – stood at 4.3 times gross annual average earnings in October 2011, the highest ratio since records began in 1987. Home affordability for second steppers (4.3) is also now less favourable than for first-time buyers (3.5).
Carol Anderson, Head of Mortgages at Bank of Scotland said: "First-time sellers in Scotland are now faced with some very tough challenges when trying to make their next move on the property ladder. Almost two-thirds of Scottish 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. It is vital that this group of home movers receive more support and attention as they play an intrinsic role in getting the housing market moving again.
"To achieve a sustainable housing market in Scotland 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, and this bottleneck will not only restrict the supply of starter properties but will have a knock-on effect across the whole of the housing market."
More help is required to support this important segment of the housing market. Around three-quarters of respondents are calling on the Government to take action to help those trying to sell their first home and a substantial number would like to see their mortgage provider offer new products to help them overcome some of these challenges.
But many first-time sellers have been taking action to help improve their situation. Around two-thirds (65%) have been saving to help fund their next move and one in four have also been overpaying on their mortgage to help build up their equity.
Have your say on this story using the comment section below