The difficulty that first time buyers have getting onto the property ladder is well documented. Lack of movement in the market, banks who are reluctant to lend, and a tough economic climate are all contributing factors. But what about those already in the property market who are ready to upscale?
According to recent research moving up the property ladder is at the most unaffordable level seen for two decades. So what is the crisis all about, and is there any way out?
Equity and ownership: A tough time for second time buyers
Put simply, many of those looking to move on from their first home in 2012 will not have built up enough equity in order to make moving home possible.
What is home equity? Equity is the market value of your property minus the amount you still have outstanding on your mortgage bill. If your property is worth £200,000 and you still owe your mortgage provider £100,000 then you have a £100,000 equity share in the property.
The problem arises when, for example, the market value of your property drops from £200,000 to £150,000, because although you will still owe £100,000 in mortgage repayments you equity share will have dropped to just £50,000, essentially cancelling out all those years you spent paying of the other £50,000. Even more damaging to current home owners is when the value of the property drops to below the amount still owed in mortgage repayments an outcome commonly referred to as falling into negative equity.
Without sufficient equity potential second time buyers will find it difficult to raise the larger deposit that they need in order to move up the property ladder. While this may seem like a small difficulty for those struggling to get on the housing ladder in the first place, the situation will also have a negative impact for first times buyers themselves as fewer properties suitable for first home ownership are coming onto the market.
As a result second time buyers may find themselves mortgage prisoners in their own home. The only option available for many second time ทาวน์เฮ้าส์มือสอง buyers will be to sit tight, increase savings pots and keep making those mortgage repayments, perhaps in the hope that house prices will eventually return to former levels or that they will one day build up enough equity to move on.
The property market is stuck in a rut, and while helping out first time buyers remains at the centre of many political agendas, it is only by looking at the bigger picture that we will really get things moving again.
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