Houseowners must save to climb property ladder

| November 15, 2011 | 0 Comments
Houseowners must save to climb property ladder

Not so long ago houseowners could rely on the equity in their existing property, generated by its growing market value, to fund a move to a larger home, but new research from HSBC confirms that this is often no longer an option.

The bank suggests that a fall in property prices means that first time buyers now need to either save or overpay on their existing mortgage in order to afford to move.

The price of first-time buyer properties has fallen by seven per cent on average since 2007 and large deposits are often required to secure a mortgage.

HSBC estimates that first-time buyers who bought their home in 2007 have a shortfall of £11,000 to move house, effectively trapping them in their existing home, even though it may no longer be suitable for their needs.

Some parts of the UK have been even more severely hit by a slump in property prices with the average first-time buyer home in Northern Ireland estimated to have fallen in value by 42 per cent over the last four years.

In contrast, first-time buyer properties have increased 1.7% in value in London since 2007, although this is the only area where the value has increased.

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.”

The latest UK house price index statistics from the Department for Communities and Local Government show that house prices fell 1.4 per cent on average in the year to September 2011, compared with an annual decrease of -1.3 per cent in August 2011.

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