Are problems afoot on the second rung of the housing ladder?

When light is shone on the housing market, there are some parts which steal all the limelight. First-time buyers, for example are the subject of much attention and quite rightly so, given how they represent the lifeblood of any local market. Likewise, at the other end of the market there are the mortgage-free owners of instagram-worthy works of art pretending to be houses. But what about the bit in the middle?

The second rung on the housing ladder is when homeowners really come of age. They have managed to secure their first mortgage, they’ve managed the whole process of buying, possibly remortgaging and then ridden the emotional rollercoaster of selling. This second step often coincides with starting a family as well, with the need for extra space, bedrooms and outside space becoming paramount. Often a new type of home is needed, that can provide both the material needs of a growing family and a higher degree of permanence and tenure.

People moving into their second home very often move from a flat into a terraced house. Terraced houses are usually more expensive than flats both because they are larger and they are usually freehold, which means residents actually own the land.

The extra cost, in theory at least, ought to be covered by higher earnings as careers progress, grown stored-equity in the first home and hopefully some more advantageous mortgage terms which minimise the jump in monthly cost.

However, there are potential problems on the horizon for this part of the ladder. The gap in average prices of flats and terraced homes is growing. In The Weald, the gap was £82,700 in 2017. By the autumn of 2020, it had grown to £96,100, equivalent to a change of £13,400. When the stamp duty holiday comes to an end in March, the affordability gap will be further exacerbated. The tax on the average terraced home in The Weald will go from nil to £3,750. If the tax break is not extended, the market could become blocked up as new first-time buyers can’t find appropriate homes.

We’re all crossing our fingers when it comes to extending the stamp duty holiday, or perhaps even permanently reducing it as the Chancellor had previously stated is his ambition. Yet, even if it remains, there are lots of things to be positive about. Mortgage rates remain historically low and the availability of mortgage finance is getting even better with lower-deposit products coming back onto the market. If you’re on the first, second or twentieth rung of the ladder, please give us a call today.