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Would-be second-time buyers trapped in their homes

Monday, 14 November 2011 11:35 AM

Up to 360,000 first-time buyers who bought a property in 2007 are likely to be trapped in their home, according to new research from HSBC.

The bank says a seven per cent fall in first-time buyer house prices since then has eroded any equity they had and made it impossible to take the next step on the housing ladder for anyone who has not been saving.

An average first-time buyer who bought in 2007 with a 10 per cent deposit would have started with £16,000 equity. However, an £11,000 fall in the value of the property would have wiped out any capital repayments made on their mortgage, still leaving them with just £16,000 to play with.

However, HSBC says it would cost them an average of £27,000 to cover the cost of selling their first home, a 10 per cent deposit on their second and stamp duty on the purchase. They are therefore faced with an £11,000 shortfall.

The moving gap is highest in Northern Ireland, where a big fall in prices means second-time buyers would need to find £64,000 to move.

First-time buyers are least badly off in London because prices have risen there since 2007 but second-time buyers in the capital would still need to find almost £3,000.

Pete Dockar, head of mortgages at HSBC, said: "These findings highlight the need to save or pay down an existing mortgage in order to fund that second step on the property ladder; first-time buyers can no longer rely on rising house prices to provide them with the deposit needed for their second purchase.”

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