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Loan charges: Homeowners buying their 2nd property face expensive step to the next rung

First-time buyers (FTBs) who bought a home in 2007 now face an average gap of £62,281 to move into their second property, according to the bank First Direct.

To secure a deposit for a house on the second rung of the ladder costs £6,464, while the additional capital they will need to borrow tops £55,817.

FTBs who bought a property for the average price of £167,417 in 2007 had a deposit of £16,742. However, thanks to the falls in house prices, just £8,923 is left from the down payment. Based on typical capital repayments, individuals will have only have generated a total equity of £23,521.

The cost of stamp duty, conveyancers and estate agents amounts to £29,985. This leaves FTBs £6,464 short of the ten per cent deposit required for the average £229,435 house. The remaining £55,817 is required on top of their current mortgage.

"In a climate of falling house prices in many parts of the country, first time buyers can no longer rely on funding their next move with profits from the sale of their home," said Ian Bartholomew, senior mortgage product manager at First Direct.

He recommends young homeowners overpay their mortgage to build up extra equity, but this could leave them sort of cash to pay utility bills and loan charges.

Jennifer Haines

Jennifer's speciality knowledge is credit card changes and balance transfers.ADNFCR-2776-ID-801490236-ADNFCR

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