Tough market stops homeowners moving

The typical cost for a “second stepper” to trade up to their next home last year was around 4.6 times annual average earnings, significantly higher than the ratio of 2.9 times a decade ago, Lloyds TSB’s home mover review said.

Trading up was slightly more affordable than in 2011, when this would cost around 5.4 times annual average earnings, the highest reading in a quarter of a century.

The South East is the least affordable UK region, with an affordability ratio of 6.3, followed by London. Both the West and East Midlands are the most affordable, with ratios of 4.0.

The affordability ratio for second steppers to trade up is calculated as the average price of a typical second stepper home minus the second stepper’s current equity position, as a ratio of average earnings.

Many would-be second steppers bought their first home at the top of the market, meaning they face a tough struggle moving up the property ladder and may find themselves in negative equity.

This also has a negative impact on struggling first-time buyers, who typically need a 20 per cent deposit, as it gives them fewer potential homes to choose from.

The typical second stepper of last year would have bought their first home in around 2008. They will have around £11,500-worth of equity in their home. By comparison, in 2002 second steppers had average equity of £45,000, equating to 38 per cent of the then average price for a semi-detached.