"The same high rates of house price growth that previously prevented them from realising their aspirations of homeownership can also help slingshot them further up the ladder when they do come to sell."
- Head of eXp UK, Adam Day
First-time buyers looking to climb further up the ladder have the best chance of doing so in the East Midlands and Yorkshire, with the equity gained from a first home sling-shotting them furthest up their respective property ladders.
eXp UK analysed the equity gained by first-time buyers in each region of England based on the increase in the average first-time buyer house price over the last five years, less the remaining mortgage balance once mortgage payments have been deducted, to reveal where first-time buyers are left with the largest cash pot to continue their climb up the property ladder.
The research shows that, across England, the average first-time buyer would have paid £208,802 to get a foot on the property ladder five years ago (2019). Today, the value of this home has climbed by an average of £47,179 to £255,981.
At the same time, the average first-time buyer will have required a mortgage loan of £177,481 when first purchasing five years ago, having placed a 15% deposit of £31,320. With the average monthly mortgage repayment coming in at £746 per month, the average first-time buyer will have paid off £44,774 over the last five years based on a repayment mortgage - leaving an estimated outstanding mortgage balance of £148,482.
When subtracting this outstanding mortgage balance from the current first-time buyer house price of £255,981, this leaves the average first-time buyer selling up today with equity to the tune of £107,499 to climb further up the ladder.
That’s enough to place a 42% deposit on the average price of a terraced home, a 36% deposit on the average semi-detached property, or a 23% deposit on a detached house.
But where across the property market can selling up help slingshot first-time buyers furthest up the ladder?
In London, the average first-time buyer selling up today would be left with equity to the tune of £151,992 once their remaining mortgage balance is accounted for - the highest sum of all regions.
However, with the capital home to the highest house prices in the nation, this equates to just a 26% deposit on the average price of a London terraced house, falling to just 15% on the average detached home in the capital.
In contrast, first-time buyers selling up in the East Midlands would be left with £94,866 once their outstanding mortgage balance is accounted for. But despite this lower level of equity, this sum is enough to see them place a 50% deposit on the average terrace home, a 41% deposit on a semi-detached property or a 26% deposit on the average detached house.
In Yorkshire, the average first-time buyer could place a 24% mortgage deposit on the average detached home using the equity accumulated over the last five years, whilst in the North West, West Midlands and South West they could place a 23% deposit on a detached property.
Head of eXp UK, Adam Day, commented: “Today’s first-time buyers are facing an incredibly tough task when it comes to getting that first foot on the property ladder, with the latest figures showing that the average price of a home now sits just two percent below historic market highs.
"However, for those who can manage it, the same high rates of house price growth that previously prevented them from realising their aspirations of homeownership can also help slingshot them further up the ladder when they do come to sell.
"In just the first five years of homeownership, the average first-time buyer looking to sell today would have accumulated over £107,000 in equity once accounting for their outstanding mortgage balance. That’s enough to catapult them up multiple rungs of the property ladder in one go, giving them the financial firepower to place a 23% deposit on the average detached home.
"This highlights the importance of getting on the first rung of the ladder as swiftly as possible and letting the property market work for you.”
