Second-Step Home-Buyers May Struggle to Find Big Enough Deposit

A new report by uSwitch has shown that 44% of first-time home-owners are relying on the equity build up in the value of their current residence for a deposit on their second home. However, studies and calculations show that for many, this will not be enough to help them make the step-up into a larger, more expensive property.


While the value of property in the UK has a tendency to rise more than it falls – a development which tends to result in larger gains in the south east regions of the country and in prime coastal and country locations, than elsewhere – those price moves aren’t always comparative between different types of properties.

For instance, while flats are popular for city living and starter-homes, unless they are in prime locations, then they tend to be more affordable. And while that should mean you can re-sell them when the time comes, any increase in value will rarely be enough, on its own, to bridge the deposit gap between a flat and a house.

The report shows that 62% of first-time home-owners are planning on trading up to buy a house. In many areas the cost of a house is significantly higher than a flat which means the increase in the value of their flat (if that’s what they own) will have to have risen by a larger percentage than houses in the area, in order for then to find the deposit they need, without having to save.

However, uSwitch shows that over the past decade, the average value of a flat has risen 15% compared with a 21% rise in the average value of a house (terraced, semi-detached and detached). If those home-owners are planning on remaining in the same area, or even moving to a ‘better’ one, then many will likely have a financial short-fall when it comes to finding the deposit for their second, more expensive home.

Tashema Jackson, money expert at, says: “Second steppers have been lulled into a false sense of security by rising house prices. In some parts of the country houses have far outstripped flats and so if you are looking to move up the property ladder you need to carefully plot your next steps.”

But don’t forget, house prices can fall and often do even if it’s just for a few months or a year. If this happens when you’re just about to start looking for a property and you don’t have any savings set aside for the deposit for a larger house, then any plans will likely need to be put on hold for some time. That’s because, even if home prices drop for only a six-month period, it will take time for them to stabilise, reclaim their previous level, before growing by enough for you to have a suitable deposit to put down on the house pf your dreams.

With this and the news that the value of a flat rarely outpaces that of a house, the most sensible option is to always try and put some money aside for future plans.