The first-time buyers trapped in their homes

Some 360,000 homeowners who bought in 2007 can't afford to trade up

A third of a million people who bought starter homes four years ago – just before the property crash – are trapped in their home by falling prices and a flat property market.

Those who have started a family and desperately need more space are being forced to make do with cramped conditions, with no hope in sight of being able to afford to move to a bigger home. Research published today by HSBC reveals that unless 2007's first-time buyers have made some substantial savings or overpayments on their mortgage, it could be impossible for them to move up the property ladder.

With the average first-time buyer's home costing £162,423 in 2007 and falling 7 per cent in value since, that's a fall of £11,362. The bank has calculated that the average family will be in exactly the same financial position now, even after making four years of mortgage repayments.

A typical first-time buyer who bought four years ago with a 10 per cent deposit would have started with £16,000 equity. But the fall in property values since then will have left them with just £5,000 of their original deposit. On a normal repayment mortgage they would have paid £11,000 off the loan, so they would now have £16,000 equity in their property – the same as they had at the start.

However, to buy the average UK home, second-time buyers would need to raise £27,000 to cover the cost of selling their first home, have a 10 per cent deposit on the new home and pay for stamp duty, HSBC says. That would leave an average family £11,000 away from being able to afford a move.

Typical is Brett Tudor, who runs internet marketing company www.seoprofessor.co.uk. The 37-year-old bought his first home –an apartment in what used to be a brewery building in the centre of Wrexham – for £135,000 in 2007 with his wife, Zuzana.

The couple now have a two-year-old daughter Talitha and are desperate to move to a bigger home, but can't. "We bought the apartment as a starter home," Brett explains. "At the time we hoped that prices would increase enough for us to sell and move up the ladder. Unfortunately we will now be staying put until we raise enough for a deposit, which by current estimates will be around £20,000."

Having looked into the possibility of moving, he says there's not much of a chance of selling right now. "There are few people interested in buying at the moment, so we will hold off putting it on the market."

One in 12 family households say they are unable to move due to a lack of equity in their home, or because they would struggle to get a bigger mortgage, says research from insurer LV. But as children arrive, the average British family has lost 11 sq ft of living space in the last three years, the insurer adds. It means children are unable to have their own bedrooms and, when they get older, will not have an area for private study.

The squeeze is getting so pronounced that one in eight families have even made potentially unsafe modifications to their homes to create more space. Second-time buyers in the South East face the highest gap, with a shortfall of almost £18,000, according to HSBC. That's because the average property in the region is worth £260,000, which means a buyer will have to pay the higher 3 per cent rate of stamp duty.

Solutions include moving to cheaper areas, where a bigger property may be the same price as a smaller starter home. But such downshifting is not an option for many because of work restrictions.

The most sensible thing to do is make overpayments on a mortgage, says Pete Dockar, head of mortgages at HSBC. "Making overpayments... can help build up finances. Overpaying increases the equity in a first home, and bolsters the deposit available to people for an onward move."

But people must check out any early repayment penalties first, he warned.

Life and Style
Customers can get their caffeine fix on the move
food + drink
Life and Style
techCould new invention save millions in healthcare bills?
Sport
David Moyes gets soaked
sport Moyes becomes latest manager to take part in the ALS challenge
Voices
Mosul dam was retaken with the help of the US
voicesRobert Fisk: Barack Obama is following the jihadists’ script
PROMOTED VIDEO
Life and Style
Black Ivory Coffee is made using beans plucked from elephants' waste after ingested by the animals
food + drinkFirm says it has created the "rarest" coffee in the world
Arts and Entertainment
Loaded weapon: drugs have surprise side effects for Scarlett Johansson in Luc Besson’s ‘Lucy’
filmReview: Lucy, Luc Besson's complex thriller
Arts and Entertainment
Jamie T plays live in 2007 before going on hiatus from 2010
arts + entsSinger-songwriter will perform on the Festival Republic Stage
Life and Style
food + drinkThese simple recipes will have you refreshed within minutes
News
peoplePamela Anderson rejects ice bucket challenge because of ALS experiments on animals
Arts and Entertainment
tvExecutive says content is not 'without any purpose'
News
A cleaner prepares the red carpet for the opening night during the 59th International Cannes Film Festival May 17, 2006 in Cannes, France.
newsPowerful vacuum cleaners to be banned under EU regulations
News
newsChester Zoo have revealed their newest members
Sport
sportLeague Managers' Association had described Malky Mackay texts as 'friendly banter'
Life and Style
fashion
Arts and Entertainment
tvSpielberg involved in bringing his 2002 film to the small screen
News
peopleCareer spanned 70 years, including work with Holocaust survivors
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Generalist HR Administrator, Tunbridge Wells, Kent - £28,000.

    £25000 - £28000 per annum: Ashdown Group: Generalist HR Administrator - Tunbri...

    Application Support - Enterprise Java, SQL, Oracle, SQL Server

    £45000 - £55000 per annum: Harrington Starr: A well-established financial soft...

    Service Desk Analyst (Graduate, Helpdesk, Desktop, Surrey)

    Negotiable: Harrington Starr: Service Desk Analyst (Graduate, Helpdesk, Deskto...

    Service Desk Analyst (Graduate, Helpdesk, Desktop, Surrey)

    Negotiable: Harrington Starr: Service Desk Analyst (Graduate, Helpdesk, Deskto...

    Day In a Page

    Air strikes? Talk of God? Obama is following the jihadists’ script

    Air strikes? Talk of God? Obama is following the jihadists’ script

    The President came the nearest he has come yet to rivalling George W Bush’s gormless reaction to 9/11 , says Robert Fisk
    Ebola outbreak: Billy Graham’s son declares righteous war on the virus

    Billy Graham’s son declares righteous war on Ebola

    A Christian charity’s efforts to save missionaries trapped in Africa by the crisis have been justifiably praised. But doubts remain about its evangelical motives
    Jeremy Clarkson 'does not see a problem' with his racist language on Top Gear, says BBC

    Not even Jeremy Clarkson is bigger than the BBC, says TV boss

    Corporation’s head of television confirms ‘Top Gear’ host was warned about racist language
    Nick Clegg the movie: Channel 4 to air Coalition drama showing Lib Dem leader's rise

    Nick Clegg the movie

    Channel 4 to air Coalition drama showing Lib Dem leader's rise
    Philip Larkin: Misogynist, racist, miserable? Or caring, playful man who lived for others?

    Philip Larkin: What will survive of him?

    Larkin's reputation has taken a knocking. But a new book by James Booth argues that the poet was affectionate, witty, entertaining and kind, as hitherto unseen letters, sketches and 'selfies' reveal
    Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?

    Waxing lyrical

    Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?
    Texas forensic astronomer finally pinpoints the exact birth of impressionism

    Revealed (to the minute)

    The precise time when impressionism was born
    From slow-roasted to sugar-cured: how to make the most of the British tomato season

    Make the most of British tomatoes

    The British crop is at its tastiest and most abundant. Sudi Pigott shares her favourite recipes
    10 best men's skincare products

    Face it: 10 best men's skincare products

    Oscar Quine cleanses, tones and moisturises to find skin-savers blokes will be proud to display on the bathroom shelf
    Malky Mackay allegations: Malky Mackay, Iain Moody and another grim day for English football

    Mackay, Moody and another grim day for English football

    The latest shocking claims do nothing to dispel the image that some in the game on these shores exist in a time warp, laments Sam Wallace
    La Liga analysis: Will Barcelona's hopes go out of the window?

    Will Barcelona's hopes go out of the window?

    Pete Jenson starts his preview of the Spanish season, which begins on Saturday, by explaining how Fifa’s transfer ban will affect the Catalans
    Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

    We know all too much about the cruelty of Isis – but all too little about who they are

    Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
    Neanderthals lived alongside humans for centuries, latest study shows

    Final resting place of our Neanderthal neighbours revealed

    Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
    Scottish independence: The new Scots who hold fate of the UK in their hands

    The new Scots who hold fate of the UK in their hands

    Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
    Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

    Blight club: Britain's ugliest buildings

    Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape