Written by Simon Gilvey.
The lack of support for first-time buyers is often cited as one of the main reasons behind the current slower momentum in the housing market; with the government focusing much of its efforts on helping those trying to get on the first rung of the housing ladder.
Focusing on the positive for first time buyers, 2013 should prove to be a good year, with lenders launching new hybrid products to help them on the housing ladder, with much lower deposits required and competitive interest rates. Yet, some would argue there is one segment of the mortgage market in a far worse position than first-time buyers: the ‘second steppers’. The phrase second stepper was first coined by Lloyds Banking Group to describe first time borrowers, who had fallen into low levels of equity or, at worst, negative equity, and were trapped in their first home as a result of falling house prices during the credit crunch.
Second steppers in such a position may be able from an income perspective, to comfortably meet a lender’s requirements for increased mortgage borrowing for a new property. They are not, however, in a position to be able to put down the required deposit to move to the next rung on the property ladder, due to little or no deposit available in their existing home should they sell.
Second steppers, in such a position, by default, can then cause a log jam in the housing market for first time buyers, as less suitable first time buyer properties enter the market to be sold.
The good news is that for second steppers, there is also light at the end of the tunnel with lenders launching products that offer higher loan to value lending, by enlisting the help of a parent. By way of an example, family guarantee mortgages allow as much as 100pc lending with a collateral charge against equity in the parental property. Such products can then help your second stepper buyer to make that move from their first home, to a potentially larger property to start the next stage in their lives – for example; to have a family.
The situation described above is where the value of seeking independent mortgage advice, from somebody who understands each lender’s criteria and products, is invaluable. They may be able to show you products on the open market that your own bank or building society don’t offer. They can also help refine your choices of lender across the market, down to the one that may be able to offer you the best chance of either being able to buy your first home, or make your next move to a new home.
Contact Simon Gilvey, director at Broadland Consultants Limited on 01603 278278 or visit www.broadlandconsultants.com and email him at firstname.lastname@example.org