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Rising property values helped homemovers step up property ladder in 2014

PUBLISHED: 07:33 20 January 2015

the number of home owners moving house reached a seven-year high in 2014 as rising property values boosted the amount of cash they had sitting in their existing homes

the number of home owners moving house reached a seven-year high in 2014 as rising property values boosted the amount of cash they had sitting in their existing homes

PA Wire/Press Association Images

The number of home owners moving house reached a seven-year high in 2014 as rising property values boosted the amount of cash they had sitting in their existing homes, a report has found.

An estimated 365,400 people moved home last year with a mortgage across the UK, marking an 8 per cent year-on-year increase and the highest figure seen since 2007, Lloyds Bank found.

London remained the least affordable place to move up the property ladder with second-step homes in the region costing an average of 11.3 times average earnings (compared to the national average of 6.7).

The London figure is marginally more affordable than 10 years ago, however, when the multiple was 12.8.

The report said that surging house prices last year boosted the equity position of many home owners, helping them to make the jump up the property ladder.

In particular, people who were living in the first home they had ever bought and were trying to take their second step on the property ladder saw their equity position boosted by an influx of first-time buyers into the market in 2014.

Schemes such as Help to Buy helped to widen the availability of low deposit mortgages for people trying to take their first step on the property ladder, helping to unleash a flood of demand from first-time buyers into the market last year.

Lloyds estimates that potential “second steppers” are now sitting on £10,000 more equity in their home than they were a year ago, due to the increase in prices paid for first-time buyer homes.

On average, potential second steppers are now estimated to have £76,131-worth of equity sitting in their existing home, giving them a 25 pc deposit for their next property, for which they will typically pay £299,428.

Lloyds found that three-bedroom detached homes are now the most popular choice for second steppers. People within this group, who are often motivated to move in order to make space for their growing families, may have previously found themselves stuck in their starter home with little or no equity as the economic downturn took hold.

Despite the upward march in property values generally over the last year, the price paid for a home by a typical second stepper is slightly more affordable now than it was a decade ago, when compared with earnings.

Second stepper homes cost 6.7 times the earnings of those buying them in 2014, compared with an income multiple of 7.0 in 2004.

Andy Hulme, Lloyds Bank mortgages director, said: “House price rises over the past 12 months have enabled more home owners to make the next move onto the housing ladder.

“The resulting higher levels of equity in their property are providing home owners with more funds to finance the purchase of their next home.

“A steady rise in property values in 2015 should further ease the constraint on many of those who bought their first home at the peak of the market in 2006 and 2007, enabling more of them to become second steppers.”

The housing market showed signs of cooling down towards the end of last year, but some experts believe that an overhaul of Stamp Duty unveiled by the Government in December could encourage more people to buy and sell homes in the coming months.

Lloyds said that the stamp duty changes have saved the average home mover £4,958, reducing the tax bill for the typical home mover property to £2,603.

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