‘More home owners moving house’

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Published: Saturday 17th January 2015 by The News Editor

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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% year-on-year increase and the highest figure seen since 2007, Lloyds Bank found.

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% 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 average deposit put down by existing home owners who were moving home generally last year was £83,302, equating to one third (33%) of the average price paid for a home mover property, at £252,064.

Home movers in the South West typically put down the largest deposits on their new homes last year, at 36%, followed by those in East Anglia, the South East and London, who all had deposits of 35% on average.

Home movers in Northern Ireland put down the smallest typical deposits on their new properties, at 27%.

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.

The much-criticised “slab” structure of stamp duty has been done away with, in favour of a graduated version of the tax, whereby a home buyer only pays the rate of stamp duty on the part of the property price that falls within each tax band, in a similar way to paying income tax.

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.

It used figures from the Council of Mortgage Lenders (CML), the Office for National Statistics (ONS) and the Bank of England to compile its report.

Housing Minister Brandon Lewis said: “Help to Buy has already helped more than 73,000 people move on and up the housing ladder, and is supporting house builders build new homes as part of our long term economic plan.

“Recent figures show the number of first-time buyers at a seven-year high, thanks in no small part to our schemes. While those buying for the first time make up the overwhelming majority of Help to Buy sales, it is also helping existing home owners move up the property ladder with just a fraction of the deposit they would normally require.”

Here are the average prices paid for a property by home movers (meaning people who were not first-time buyers) regionally last year, followed by the typical deposit they had and the deposit as a percentage of the purchase price:

:: North, £ 169,276, £ 51,057, 30%

:: Yorkshire and the Humber, £ 180,187, £ 56,717, 31%

:: North West, £ 188,079, £ 55,894, 30%

:: East Midlands, £ 190,883, £ 58,868, 31%

:: West Midlands, £ 205,946, £ 66,368, 32%

:: East Anglia, £ 234,321, £ 82,061, 35%

:: Wales, £ 179,176, £ 55,357, 31%

:: South West, £ 248,141, £ 89,700, 36%

:: South East, £ 332,304, £ 114,848, 35%

:: London, £ 480,416, £ 166,265, 35%

:: Northern Ireland, £ 149,392, £ 40,128, 27%

:: Scotland, £ 192,768, £ 58,544, 30%

:: UK, £252,064, £83,302, 33%

Published: Saturday 17th January 2015 by The News Editor

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