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Rise in equity levels boosts second-stepper affordability but figures down over 10 years

Housing affordability for “second steppers” has improved in the 12 months to June, according to research by Lloyds TSB.

In June housing affordability – calculated as the average price of a typical second stepper home less their current equity position – stood at 4.4 times gross annual average earning, an improvement on 4.9 a year earlier.

However, affordability declined significantly over the past decade when it was 2.9 in 2003.

The rise in equity levels has led to the improvement in second stepper affordability, Lloyds TSB says.

The typical potential second stepper in June 2013 bought their first home in 2008. Such a homeowner is estimated to have an equity level of £21,200, on average – the equivalent to 13 per cent of the average price of a typical second stepper semi-detached house, at £165,059.

A year ago, the typical second stepper equity level was estimated to be less than 1 per cent of the average semi-detached house, at £1,120. This is down to rising house prices.

But equity levels remain low by historical standards. For example, the typical second stepper in 2005 was able to fund close to 44 per cent of their next home through equity built up in their first property.

Lloyds TSB housing economist Nitesh Patel says: “Affordability has improved for the second stepper in the past year. Nonetheless, there are many potential who are still in their first home which they bought in the run-up to, and at, the peak in house prices in 2007.

“Many of these homeowners may still be unable to move due to having either very low, or negative, equity in their homes.”

The research also highlights a regional bias in affordability with the West Midlands and East Midlands the most affordable parts of the UK, both measuring 3.1. London is expectedly the least affordable region, with an affordability ratio of 5.7.



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