People are moving home in the UK much less than they used to 30 years ago which has potentially serious consequences for the healthy function of the housing market, new research suggests.
The reduced mobility is largely the result of missing movers, people who have a mortgage on their current home but are not moving up the housing market, according to the study commissioned by the Council of Mortgage Lenders (CML).
The analysis from researchers Neil Hudson and Brian Green suggests that missing movers account for about 320,000 of the annual housing transaction shortfall. They point to a number of reasons for the decline, including the fact that there are now fewer mortgaged owners, and they tend to be older and so naturally less likely to move. However, there are still around 140,000 missing moves that can be attributed to a decline in the rates of moving among mortgaged home-owners.
The research report explains that three factors determine the moving rate among this groups; their desire to move, sufficient funds, and the availability of a home they want to buy. Of these three factors, the research suggests that the availability of sufficient funds, specifically sufficient equity, is the dominant factor holding back the mortgaged mover rate.
The researchers found that, in many ways, it is not the present but the past that is extraordinary. For five decades the market underwent changes that provided an enormous boost to the ability of people to buy and to own their homes. But expecting a return to those conditions is unrealistic, they suggest.
The bulk of the decline in turnover in privately owned homes followed two deep recessions. While there will be multifarious factors at play, this very much suggests that economic factors are playing the lead roles, the study explains.
When they examined the fall in housing transactions to find how different groups were affected by the recent recession, they found significant differences. There were more cash buyers than before the recession and the number of first time buyers, having plunged, had bounced back strongly.
However, mortgaged movers were at half their peak level and there was little sign of the numbers recovering. The collapse in mortgaged movers accounted for 80% of the overall fall in residential transactions from the pre-recession peak to current levels.
Much of the 320,000 gap was down to falling numbers of mortgaged home owners, demographic changes and switches from mortgaged movers to cash buyers. But this left a further group of 140,000 other missing movers.
The study says that this is the result of a reduction in the mortgage mover rate. Put another way, these represent the fall in the propensity of mortgaged home owners to move. It is significant, equivalent to almost 40% of the current mortgaged movers. That different groups were impacted differently added weight to the argument that economic forces rather than preferences were dominant.
‘The challenges of the future must be tackled on the basis of the context in which we find ourselves today. That is one of low interest rates, relatively low inflation, high and rising house prices relative to the incomes of prospective home owners, and an ageing population,’ the report says.
‘From our analysis, this combination is unlikely to unlock broad based equity building or provide much scope for more relaxed lending. Perhaps fresh, novel policies will emerge that facilitate more moving in the current much changed economic environment,’ it adds.
‘However, in their absence we should expect the foreseeable future movement among mortgaged home owners to remain constrained,’ it concludes.
