Deposits still stumbling-block for Scottish ‘second-steppers’

WHILE the housing market is starting to thaw for first-time buyers, people who are selling a house for the first time are still suffering, says the Bank of Scotland.

The “second-steppers” report shows that little has improved for people who are seeking to move up the housing ladder.

Many home-owners are stuck in a property too small for their needs which may even be worth less than it was when they bought it, according to the report.

More than half (53 per cent) of people looking to move say their current property is too small for their needs, more than a quarter say they want to start a family while 38 per cent are planning to move to a new area.

In 2011 people expected to stay for four years in their first home, whereas now they are more likely to plan to stay for five-and-a-half years.

On average, second-steppers have had their home on the market for 13 months while one in ten (9 per cent) have previously tried to sell.

Two-thirds (66 per cent) of second-steppers in Scotland say the level of deposit is the main challenge for them being able to arrange a mortgage.

One in 20 (6 per cent) say they don’t have any money saved to put towards a deposit and one in ten (12 per cent) don’t have enough of a deposit saved at present. The average deposit for a typical second-stepper in Scotland in 2012 was £37,057, four times more than the average deposit required in 2002, which was £9,053.

The average house price paid by a first-time buyer has reduced by £28,345 since the typical second-stepper in 2012 bought their first home in 2007.

Almost half of second-steppers have lost some or all of the deposit they paid on their first property due to declining house prices since they purchased their first home.

The research shows Scottish second-steppers have on average just over £33,000 of equity in their current property, with more than a third (34 per cent) having less than £20,000. Three- fifths (60 per cent) said they expected to have more equity in their property by now.

Laurence Mann, head of mortgages at the Bank of Scotland said: “Despite recent improvements in the housing market, first-time sellers in Scotland continue to be faced with some very real and tough challenges when trying to make their next move on the property ladder. 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.”

However, there are some signs of optimism. Almost a fifth of second-steppers in Scotland believe the housing market will improve this year, while more than one in ten (11 per cent) think it will be easier to sell their property this year.