Second-stepping: The true cost of moving to a bigger home

Is buying your second home harder than buying your first?

It depends what you’re looking for and how savvy you were the first time.

What is a ‘second-stepper’?

First home owners, who are looking to sell their current property and buy a new one, are known as ‘second-steppers’. Their position is unique in that, they are not first-time buyers anymore, so there’s not as much help available to them, such as savings accounts or government schemes. On the other hand, second-steppers are not experienced property moguls with an extensive portfolio.

This middle-ground can make the move to a second home challenging.

What affects second-steppers?

According to the latest Second-stepper report, from Lloyds Bank, 35% consider 2018 a worse year to sell their home than 2017. Meanwhile, almost a third (29%) find the current economic uncertainty troublesome. The biggest factors holding second-steppers back are:

Interest rates: As the Bank of England (BoE) increased interest rates for the first time in 10 years in 2017, many homeowners face an increase in their mortgage repayments. This has led to almost two fifths (39%) of those looking to move into a new property find the potential of further interest rate rises concerning.

Money: The average homeowner looking to move in 2018 has owned their first property for four years. In 2014, the average first home cost £167,137 and is now worth £211,296. This means that the average second-stepper can expect to see a realised equity of £85,877.

The average gap between the sale value of a first home and the price of a second home is £135,985. However, the equity gained from the sale can be used to fill some of this, leaving second-steppers to find an additional £50,108.

Unfortunately, those figures are national averages, and a different story can be seen in certain locations. For example, second time buyers in Northern Ireland need an average of £73,499, whilst Londoners are looking at a shortfall of £330,599.

Competition with first-time buyers: More than half of second-time buyers (52%) believe that there are now more first-time buyers in the market and that this has been exacerbated by the changes to Stamp Duty in the Autumn Budget. This increased confidence means that there are more buyers in the market and the competition is much fiercer.

‘Must-have’ property features: More than a quarter of second-time buyers say they have not yet found the right property for their family. A long list of ‘essential’ features, including off-road parking (61%), a garden (59%) and a kitchen/diner (56%) means that finding the perfect property could be a futile endeavour for some people, or require a change in priorities.

Bad first home decisions: Mistakes made when buying their first property may be holding second-time buyers back for fear of repeating them. 10% feel that the decision to buy their first home was rushed and that they did not take enough time to look at the details, while more than a third bought a home which is too small for their needs.

Easing the transition

What are the options facing you, if making the leap from first to second home is proving to be more challenging than you expected?

It depends how intent you are on moving home.

Renovate: You could put moving plans on hold and focus on improving your situation, finances and current living conditions. 40% of potential second-steppers said that they will carry out home improvements if they run into difficulties selling their current property. This has the dual advantages of increasing the property’s value, as well as making you feel better about staying put, for now.

Compromise: Many second-time buyers have a long list of features that their new home must have in order to be perfect. These include:

  • The age of the house; 37% want period property, while 36% are looking for a new build
  • 25% favour recently developed and renovated homes
  • 21% want a ‘fixer-upper’ project
  • Location: 48% are looking for a property in town, 40% yearn for village life, 31 prefer the countryside and just 27% want to live in the city

The combination of preferences will determine how affordable a home is. For example, finding a period property in a city setting is likely to be much pricier than a fixer-upper in a small town. If moving quickly is an important part of your plan, you may need to compromise on one or more of these features to find an affordable home in time.

Save: To bridge the shortfall between your first and second homes, you will probably need to increase your savings. As you will no longer be a first-time buyer, Lifetime ISAs and Help to Buy ISAs will not help. However, a standard ISA will offer tax-efficient savings.

For more information and help with buying your next home, feel free to get in touch with us on 0207 808 4120.