Moving home at its hardest for 25 years

The latest Lloyds TSB Homemovers Review claims housing affordability for second steppers stood at almost five (4.7) times gross annual average earnings in June 2012; the second highest ratio since records began 25 years ago.

Second stepper affordability is calculated as the average price of a typical second stepper home less their current equity position as a ratio of average earnings.

This affordability measure has risen significantly over the past decade from 3.2 in 2002 and is well above the long-run average of 3.3.

However, it does represent an improvement on June 2011 when the ratio stood at 5.2, reflecting the losses faced by those who bought for the first time at the very top of the market in 2007.

Home affordability for second steppers is also less favourable than for first-time buyers - 4.7 times gross annual average earnings compared with 4.1.

This is in contrast to the peak of the housing market in 2007 when second stepper home affordability (at 4.3) was significantly more favourable than for first- time buyers (at 5.5).

The current affordability position for second steppers is similar to much of the 1990s when falling house prices in the first half of the decade and weak house price growth thereafter, adversely affected levels of equity.

This made it typically harder for home buyers to move up to the second rung of the housing ladder than it was for first-time buyers to enter the market during most of the decade.

Suren Thiru, housing economist at Lloyds TSB, said: "It is clearly very concerning that the challenges facing those attempting to take their second step on the housing ladder are the toughest for more than a generation.

“This follows the significant decline in house prices over recent years and the subsequent erosion of equity among those who bought for the first time at close to the peak of the market.

"The current problems facing second steppers have serious implications for the wider housing market, creating a bottleneck that significantly limits the number of homes available to first-time buyers as well as stopping many homeowners who need to move, possibly for family reasons, from doing so."

There were 150,900 homemovers in the first half of 2012; a rise of 9% on the same period in 2011.

This is around half the rise in first-time buyers (17%). As a result, homemovers account for the smallest share of homebuyers7 (60%) since 2001.

This reflects both the current difficulties faced by homeowners looking to move and the recent ending of the stamp duty holiday which is likely to have boosted the number of first-time buyers.