First-time buyer house prices have fallen on average 7% since 2007, eroding the equity first-time buyers have in their homes making it near impossible for those who have not been saving.
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 £5,000 of their original deposit remains.
Assuming they have been making capital repayments on the mortgage for the past four years, these first-time buyers would 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 figures show that to move up the ladder and buy the average UK home, these second-time buyers would 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.”
