The cost of moving up the housing ladder has reached its highest level on record with new data from Rightmove showing the price gap between a typical first-time buyer home and a second-stepper property is now at its widest ever.
According to the property portal the average asking price for a typical first-time buyer property – defined as a home with zero to two bedrooms – stood at £226,955 in March.
By comparison, the average price of a typical three to four bedroom second-stepper home was £345,857, a 52% increase.
In cash terms, this represents a jump of £118,902, meaning buyers looking to move up must typically build an additional £23,780 in equity to afford a 20% deposit on their next property. This is on top of qualifying for a larger mortgage.
GROWING GAP
Rightmove says that the growing gap is being driven partly by the slower price growth of flats, which make up a large share of starter homes, compared with houses.
Over the past 10 years, the average price of a flat has risen by just 8%, while house prices have increased by 34%. The average asking price of a flat is currently £301,338, compared with £379,526 for a house.
RACE FOR SPACE
Colleen Babcock, Property Expert at Rightmove, says: “The race for space that began during the pandemic caused a major shift between houses and flats, and it’s a shift we’re still feeling today.
“Flats, which make up a much larger share of first-time buyer homes and markets like London, have seen slower price growth, while houses have pulled further ahead. Concerns around leaseholds and ground rents are also likely weighing on flat prices.”
The challenge of trading up varies across the country, with buyers in the South East facing the biggest jump in cost. There, the average first-time buyer home costs £286,748, compared with £460,781 for a second-stepper property – a 61% increase.
By contrast, the gap is smallest in Yorkshire & The Humber, where the difference is 38%.
EQUITY SLIDE
Matt Smith, Rightmove’s Mortgage Expert, says: “Inevitably trading up means borrowing more. Home movers usually take advantage of having built equity since the purchase of their first home to fund a larger deposit, meaning they have access to cheaper rates.
“If equity is reduced, this means home movers are likely to need to look at alternative strategies, either through reducing their mortgage balance by overpaying, or boosting their deposit through savings.
“They can look at taking more incremental steps up the housing ladder, or scout out alternative, cheaper locations.
“If buyers are facing the prospect of moving up the ladder at higher Loan-To-Values, lenders do have options to support this — powered up by recent changes to affordability rules by the regulators.”
AFFORDABILITY CHALLENGE
Mary-Lou Press, President of NAEA Propertymark (National Association of Estate Agents), says: “The growing gap between first-time buyer homes and second-stepper properties highlights a widening affordability challenge across the housing market.
“While many first-time buyers are getting onto the ladder, progressing beyond that first step is becoming increasingly difficult, particularly as house prices continue to outpace those of flats.
“Building the additional equity required to trade up remains a major barrier for many households.”
RIGHT HOMES, RIGHT PLACES
She adds: “There also needs to be a stronger focus on delivering the right homes in the right places. An additional bedroom can command a significant premium despite offering limited extra space, meaning some homeowners may choose to renovate rather than move.
“However, this can further restrict supply, as fewer first-time buyer homes return to the market, limiting opportunities for new entrants.
“Regional differences remain stark, underlining the need for a housing strategy that reflects local markets and supports mobility. Alongside helping first-time buyers, governments must ensure there is a sufficient mix of homes to support people at every stage of the housing ladder.”
IMPOSSIBLE HOUSING LADDER
Karen Noye, Mortgage Expert at Quilter, says: “Rightmove’s numbers show a housing ladder that is becoming almost impossible to climb.
“A 52% jump from a typical first‑time buyer home to a three or four‑bed property was already a stretch, but the latest rise in mortgage rates, driven by the escalation in the Middle East pushing oil prices higher, is making that leap even tougher.
“Higher funding costs feed directly into mortgage pricing, and that removes many buyers from the running before they even start.
“Traditionally, people moved into bigger homes as their families grew. That pattern is breaking down. Buyers now need almost £24,000 of extra equity just to maintain a 20% deposit, and in regions like the South East the gap reaches 61%.
“Many households simply cannot make the move when children arrive, which inevitably shapes decisions about family size and contributes to the UK’s broader demographic pressures.”
“The numbers no longer work.”
“The flat versus house divide is widening too. With flat prices rising only 8% over the past decade compared with 34% for houses, many owners lack the equity they expected.
“Combined with higher mortgage rates, the numbers no longer work for a large share of would‑be second‑steppers. Until borrowing costs stabilise and the price gap narrows, this part of the market is likely to remain blocked, with consequences that extend well beyond housing.”
