While the press is dominated by the eternal struggles of first-time buyers, the outlook for second-steppers is quietly getting bleaker.
According to research from Lloyds, 58% of those looking to buy a new home will not be able to do so without relying on family and friends for financial support.
Furthermore, the research suggests that second-steppers are turning to loved ones to help them raise an average of £25,450, despite 57% having previously turned to family and friends for an average of £19,824 to help them to buy their first home.
What is second-stepping?
‘Second-steppers’ are those who have already got a foot on the property ladder but are looking to move to a second home. This shouldn’t be confused with those who are buying a second home to rent out or to split their time between two locations. Instead, second-steppers are usually looking to sell their current property to support the purchase of their new home.
Who is helping to fund second-stepping?
Family members and even friends are stepping in to help support those who are looking to buy their second home. Parents are taking the brunt of the hit; 22% of second-steppers have asked to make a withdrawal from the bank of mum and dad, meanwhile 13% have asked grandparents for help and 6% have turned to their friends. Those parents who agree to help fund the move will find the money to do so by:
- Dipping into their savings (54%)
- Downsizing their own property (48%)
- Remortgaging (40%)
- Selling a property which is not their main residence (29%)
- Giving up holidays or hobbies (19%)
Second-stepper sacrifices
Although many second-steppers have resorted to asking loved ones for help to afford their new home, it shouldn’t be assumed that they are not contributing anything themselves. 62% will use equity from their current home, while 39% plan to use personal savings. Furthermore, the financial impact of second-stepping means that almost a third (28%) have reduced the number of children they plan to have as a result of the financial strain of moving up the property ladder.
Andrew Mason, Mortgage Products Director at Lloyds Bank, commented: “Support from generous family and friends remains vital in helping Second Steppers in taking the next step on the property ladder, despite more Second Steppers now feeling optimistic about the housing market.
“We continue to see parents make big sacrifices as their children return for help with housing for a second time. However, to ease the burden on parents, we are seeing more Second Steppers plan ahead for their next big move by saving and paying more to their mortgage.”
Other issues facing second-steppers
Last year, 60% of second-steppers were unable to make the move as planned due to non-financial reasons:
- 26% could not find a property that met their needs
- 25% could not find a suitable property within their price range
The effect of delaying second-steppers
While second-steppers are held back from purchasing their next home, they continue to live in properties which are more suitable for first-time buyers. That means those who are saving a deposit for their first home are left with a limited property market and the most suitable homes are unavailable due to being occupied by people who no longer benefit from them.
Next steps for second-steppers and their families
If you are currently looking to make the move to a new property, your main priority is likely to be ensuring you have enough money to pay the deposit and afford a home which meets your needs. To make this process easier you can:
- Keep your savings in a suitable place: While Lifetime ISAs and other products aimed at first-time buyers are no longer applicable, cash savings continue to offer minimal risk for short-term savings. The best product to use to save money to buy your new home will depend on your circumstances, so please get in touch with us for tailored advice on this.
- Widen your search criteria: The cost of living differs by area, so if you are struggling to find a property within your budget, it may be worth considering homes in areas with lower average costs.
- Accept available help: If your loved ones are in a position to help you to afford your house move, there is no harm in letting them. Just remember to say thank you!
For those who are considering supporting a second-stepper in their homebuying adventure, it is important to see how your desire to help fits in with a realistic financial plan.
Helping those we love to achieve their dreams can feel like second nature to parents, but there is no point pouring all your savings or the equity from your own property into their move, if it will compromise your own financial stability in the process.
To discuss the options surrounding buying your second home, or helping those looking to make the move, please feel free to get in touch with us on 0800 612 8099.