Press Article
METRO - 24 November, 2011
Homeowners trapped
By Jo Eccles
According to a recent report from HSBC, approximately 360,000 young homeowners are trapped in the homes they bought at the peak of the market four years ago due to price falls. Since 2007, an average of £11,000 has been wiped off UK house prices, making it incredibly difficult for homeowners to move onto the second rung of the property ladder, especially outside of London, where most of the price falls have occurred.
Most homeowners rely on the value of their home increasing, and they use the increased value (and equity) to trade up to a more expensive property. However, a lot of homeowners in fact have less equity in their property than when they bought it, meaning that they can’t upsize. Some of those homeowners who bought their property with a 100% mortgage - in the heady days when lenders were providing them – are now in negative equity, as their mortgage is bigger than the value of their home.
The cost of moving is also crippling those wanting to upsize. Buyers need to save up for stamp duty, legal fees, survey fees and mortgage fees. The average cost of moving is now £27,410 which is more than the average UK salary. These costs need to be paid on top of a mortgage deposit, making it near impossible for buyers to make that next jump.
This is an even more difficult task if would-be buyers are renting whilst trying to save. This explains why so many young would-be buyers are moving back home while they try to save. Some experts fear this problem is changing the demographics of our society, where people are putting off getting married and having children as a result.
As Paul Smee of the Council of Mortgage Lenders said, home ownership is now an ‘unrealistic assumption’ for many and home ownership levels are falling and continuing to do so. We therefore need to embrace the prospect that renting is a long term necessity for many. With average rental prices having leaped to £718 per month outside of London, and over £1,000 within London, it is important that we see stability in the private rented sector so that tenants aren’t priced out of the rental market too.