Second steppers, as they are referred to in the property industry, are those people who are still living in the first home they bought who do not have the necessary funds to take that second leap up the property ladder.
This is causing quite a problem in the property market because it’s stopping first-time buyers entering the market and the whole process come to a bit of a standstill.
So what’s the problem?
The main problem that second steppers are finding is the sheer cost of making that upward move. Many first-time buyers are still suffering with negative equity in their property so they are reluctant to take the financial loss of moving on and in addition to that, the crippling prices of stamp duty are exacerbating the problem.
For a property worth over £270K buyers have to pay more than £8K in stamp duty and for properties over £500K then the stamp duty is more than £20K. The latter in particular is holding up the London property market where second steppers are just not prepared to pay out those kinds of costs.
It is estimated that on average, second steppers have to find the best part of £60K to make a relatively conservative leap up the ladder. This would mean that they would need to have some decent equity in their existing property as well as probably having additional savings as well. And as we alluded to earlier, this simply isn’t the case.
So what can be done?
Well, there certainly would seem to be a case for the government to address stamp duty costs. More affordable housing for first-time buyers is always being discussed in Government circles and that would certainly help but where does that leave second steppers?
At the moment their only avenue would appear to be the Government’s Help to Buy scheme which was originally intended for first-time buyers.
Second steppers have increasingly been taking advantage of the ‘equity loan’ initiative, which enables them to purchase a new-build property worth up to £600K with a small 5% deposit. The government will lend the buyer up to 20% through an interest free loan for the first 5 years. This enables the buyer to take out a 75% mortgage to purchase the property. However, after 5 years, interest starts to accumulate on the 20% part of the loan, albeit at a low rate.
This is stimulating the market to a certain extent, but it is evident that more needs to be done. It will be interesting to see how the situation develops for second steppers over the next 12 months with the support of Anthony Stockton Solicitors. The qualified team will make aware with the conveyancing process.