Why aren’t people climbing the property ladder?

Increasing numbers of homeowners are opting to stay put rather than move up the property ladder, according to research by the Council of Mortgage Lenders (CML).

Prior to the financial crisis of 2009, there were around 1.6m home sales annually in the UK, the CML said. This figure plummeted to 860,000 that year, but now stands at around 1.2m, meaning there is a 400,000 shortfall in sales compared to nearly a decade ago.

The CML claims that around 320,000 of this shortfall is due to “missing movers”, those who own a mortgaged property but have decided to stay put rather than move. The bulk of these people are younger than 50, and live in homes worth less than £300,000 which are more likely to be in urban locations or urban fringes.

Reasons people are staying put

Reasons that are preventing people from moving on include a lack of equity, limited desire to move, and not being able to find a property they want to buy.

Steep property prices in many areas of the country mean that home-movers need big deposits to fund purchases, which they may not be able to afford unless they have seen significant growth in their existing property’s value.

High moving costs can also put people off moving home, with stamp duty, removal bills, survey costs and conveyancing charges combined often running into tens of thousands of pounds.

Almost one in three ‘second steppers’ need financial support from family or friends to move up the property ladder, according to Lloyds Bank. Without this support 35% say they wouldn’t be able to afford to move.

Lloyds’ survey found that those turning to family members to help them out (26%) are typically looking to borrow more than £20,000, and one in four second steppers think it’s now harder to move up the property ladder than to get on it in the first place.

More help needed for movers

Earlier research conducted by the CML found that the number of first-time buyers over the past 12 months increased to 342,000, more than any other period over the past nine years, as mortgage lending shifts away from home movers towards first-time buyers and those looking to remortgage.

Low mortgage rates along with government housing schemes are helping those trying to purchase their first home, whereas there is limited assistance available for those looking to move up the property ladder.

“Perhaps fresh, novel policies will emerge that facilitate more moving in the current much-changed economic environment,” said a spokesman for the CML. “However, in their absence we should expect the foreseeable future movement among mortgaged home-owners to remain constrained.”

If you are among the homeowners who are intending to stay put, remember that it’s still important to regularly review your mortgage to make sure you are on the best possible deal.

According to L&C’s own research, more than a third (36%) of homeowners are paying their lender’s Standard Variable Rate (SVR), even though these rates are typically much higher than other mortgage rates.
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