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Families who are looking to move into larger properties are finding themselves stuck in first-time buyer flats because they cannot sell their homes or get a mortgage.

A survey by LloydsTSB found that “second steppers”, those who have a first home to sell and who want to move up the ladder, are increasingly stuck in unsuitable accommodation.

The report reveals that home affordability for Second Steppers has become much less favourable and declining house prices have led to many homeowners being in negative equity.

Second Steppers are homeowners looking to sell their first home and move up the property ladder.

Many potential Second Steppers in today’s market would have bought close to the peak of the UK property market and are now finding it increasingly difficult to get off the “first rung”.

Many bought at the peak of the market in 2007, and may have negative equity to cope with as well as a lack of buyers and difficulty meeting moving costs.

The figures show the majority of property vendors in this situation have been stuck on the property ladder for over 12 months.
Some will have had children in the intervening time and feel that they are stuck in unsuitable accommodation.

22% now believe that it is harder to move up the housing ladder than to get on it in the first place.

According to Lloyds TSB’s report,
• 61% of second steppers have wanted to climb up the ladder in the past 12 months but have been unable to do so as they face an increasing number of challenges.
• 22% believe it is now harder to move up the ladder than get on it in the first place.
• 43% also feel it will be as equally difficult.

Stephen Noakes, mortgage director of Lloyds TSB said: “First-time sellers are now faced with some very tough challenges when trying to make their next move on the property ladder and many are finding it more difficult than getting on the ladder in the first place. 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.”

A recent study by HSBC also found that as many as 360,000 home owners are unable to move up the property ladder thanks to a combination of sliding house prices and more restrictive lending rules.

Those who bought properties in 2007 before the housing crash do not now have sufficient equity in their homes to trade up to larger properties, according to new research by HSBC.

Although most are not yet in negative equity, they do not hold enough of their home’s value to cover the required 10% deposit on a new property and pay associated moving costs, such as stamp duty, agent fees and legal expenses.

The problem has been exacerbated because the price of many first time properties has fallen faster than the rest of the housing market.

Demand from first time buyers has waned since lenders pulled out of the 100% mortgage market.

Mortgage lenders now require buyers to put down at least a 10% deposit, and even then these borrowers will be charged a higher mortgage interest rate than those borrowing 75% of a property’s value.

Peter Dockar, the head of mortgages at HSBC, said: “Those who have bought their first home can no longer rely on rising house prices to provide them with the deposit they need for their second.”

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