By
Neil Simpson, Financial Mail On Sunday
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If you have outgrown your home and are hoping to move up the housing ladder this spring, don’t expect an easy ride.
While there is some good news for potential ‘second-steppers’ there are plenty of worrying challenges. Some experts predict a housing logjam, with large numbers of owners effectively trapped in unsuitable properties.
A Lloyds Bank survey highlights that a significant proportion of owners already say it is harder to move up the housing ladder than it was to get on to it in the first place. Here we tell you everything you need to know if you want to move to a bigger home.
Difficulties: A big proportion of owners say it is harder to move up the housing ladder than it was to get on to it in the first place
- THE GOOD NEWS
Estate agents tip this spring as a great time to sell a first home – not least because Help to Buy hysteria has seen buyers flood back into the housing market and made the price of many starter homes rise faster than any others.
The trend is expected to continue as low mortgage rates encourage buy-to-let investors, boosting the competition for entry-level homes.
But the gap between the average first and second home is still wide. Jump from a typical first-time buyer flat to a second-timer semi-detached and you’ll need to find an extra £94,000 in the South East, according to Lloyds Bank.
In London, where first-time flats are particularly expensive, the average gap is smaller at £64,000 while in Wales the mover gap is £14,000. In the North it is £33,000 and across the country there are hopes that the gap might narrow as sale prices on first-time homes power ahead.
The next bit of good news is that low-equity mortgages are becoming more widely available, helping financially strong second-steppers even if their first homes have fallen in value since they bought.
While it has not been widely publicised, most Help to Buy lenders will offer 95 per cent loans to second steppers as well as to first-time buyers.
And while big players such as Nationwide Building Society are promoting special deals to house movers, smaller player such as Saffron Building Society now offer special ‘next step’ mortgages as well.
- … AND THE BAD
While mortgage choice appears to be widening, experts say new lending rules mean owners might be refused a further advance when they try to move – even if they have a perfect credit history and have not missed a single payment on their existing loans.
From next month the Mortgage Market Review will set tough new standards on how much borrowers can raise, what kinds of income will be taken into account and what sort of loans can be offered.
The self-employed, big borrowers or interest-only customers who were approved a few years ago may all be turned down if they ask for similar or larger loans on the same basis now.
Borrowers who have taken out payday loans or opened online gambling accounts since taking out their original mortgages may find these count against them when they ask to borrow more.
The more stringent approvals process may also affect owners who do not need to borrow more but just want to transfer their existing mortgage on to a new property – taking advantage of what are called ‘portability’ features.
Brokers say portability was always subject to terms and conditions, and lenders are applying them more rigidly and turning requests down as the start date for the Mortgage Market Review’s new regime approaches.
The best advice for owners looking to move is to check your finances are in a good state – not least by checking your credit report – before having an initial discussion with your current lender.
The new rules mean lenders will not just check you can afford the mortgage deal you are applying for – they will ‘stress test’ the application to see if you have enough spare cash each month to meet the payments if interest rates shoot up.
If you go overdrawn regularly it is worth waiting till you have at least six debt-free months on your record before applying. And with refusal rates set to rise, mortgage lenders or brokers charging high non-refundable application fees look even less attractive.
If I don’t buy my next flat now I could miss a chance
Next step: Lorna Harrison is moving to be nearer to her work and friends
Clinical nurse Lorna Harrison hopes to take advantage of rising demand from first-time buyers and buy-to-let investors and move from her one-bedroom flat in Watford, in Hertfordshire, to a similar sized home in north-west London.
She says: ‘I bought my place in 2007 and have been far happier owning rather than renting. But I’d rather be closer to my work and friends in London.’
Lorna, 37, is listing her home for £135,000 with low-fee estate agency OnePerCentOrLess to reduce her costs and give her a bigger deposit for the home she is hoping to buy.
‘I’m in a good, stable job but everyone seems to think interest rates will go up soon so I don’t want to borrow more than I have to,’ she says.
Lorna is currently paying Yorkshire Building Society’s standard variable rate of 4.99 per cent and intends to apply for a bigger loan from the lender when she has an offer accepted on a new place.
‘If Yorkshire can arrange things easily that will take some of the stress out of the move and I can then switch deals in a year or so if it looks as if better rates are on offer elsewhere,’ she says.
‘My biggest worry is that rising house prices will put the next rung of the housing ladder out of my reach – so if I don’t move now I could miss my chance.’
Comments (15)
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Steve,
UK, United Kingdom,
5 hours ago
If the Government insist on sticking their noses into my business by them deciding what I can or can’t afford, I’ll stick to renting and when I retire they can pay the b!!!!! rent! I have no pension and will make sure there are no savings for them to get their hands on either!
james,
none, United Kingdom,
8 hours ago
This bears all the hallmarks of bubble.
raptor,
poole, United Kingdom,
9 hours ago
god this society stinks…it really will be “two tier” if it isnt already
Mace You Good,
Yellow is the Fellow, United Kingdom,
9 hours ago
When are the Tories going to get this? For the majority of Britain, the feel good factor ran from 2008 to 2013 whilst house prices were gradually but surely correcting. As prices are being rigged into rising again, we aren’t just experiencing the return of the feel bad factor from the great Labour contraction of 1997 to 2007, we’re seeing the growth of a raging anger against the Tories for their maliciously inflicting this worst of all worlds scenario on us. Salaries falling, pensions falling, career prospects falling, jobs security falling, affordability of education falling, affordability of child care falling, savings returns falling, spending power falling, and now this government sponsored house price disaster. Osborne is ruining tens of millions of people’s lives and aspirations. I never thought I’d say this after Brown created such an unbelievable economic mess, but for me stretching back to the 80s, Osborne is the worst chancellor we’ve had in living memory.
raptor,
poole, United Kingdom,
9 hours ago
raptor,
poole, United Kingdom,
9 hours ago
shiftworker,
derby, United Kingdom,
10 hours ago
A mugs game! Stay put and wait for the next inevitable crash which will make things more affordable again.
Daoud 88,
Swansea,
14 hours ago
“Lorna Harrison hopes to take advantage of rising demand from first-time buyers and buy-to-let investors.” Says it all really. She can earn more as an amateur property speculator than as a highly-trained, clinical nurse. Clearly, something has gone seriously wrong in this country.
royston amphlett,
bournemouth, United Kingdom,
17 hours ago
Hurry up!, or you will not have a house to take it with you
wageslavedave,
hull,
18 hours ago
that’s one of the ways the gov keeps this pyramid scheme going , pcychology to pray on peoples fears of missing the boat to get them to panic buy.
m22,
Suffolk by the sea, United Kingdom,
14 hours ago
The Junkyard Angel,
York,
19 hours ago
The obsession to ‘move up the ladder at all costs’ is quite sad really, indicative of where we are as a society!. Get some real focus in your life.
Aggrieved pensioner,
Manchester,
19 hours ago
The property market needs a bit of government stimulus to get it moving. how about end stamp duty and give grants for deposits.
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If I don"t buy my next flat now I could miss a chance: "Second steppers" get a leg-up on the ladder as first home prices soar
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