Home movers have been the borrower group to take the biggest blow from the changes in the UK mortgage market over the past few years, according to Stefano Silvestrin, senior economist at Nationwide Building Society.
Speaking at the Financial Services Expo (FSE) London yesterday, Silvestrin said home mover activity was down 52 per cent from its peak, while first-time buyer levels were 26 per cent below their highest level.
Even buy-to-let transactions – a sector widely thought to be growing at record levels – were 44 per cent below their peak level prior to the credit crunch. Only cash transactions were ahead of their pre-crisis peak, up 3 per cent.
Silvestrin said: “Housing transactions are currently well below the average. It has been surprising how the pace of recovery has been a little sluggish compared to what we, and the Bank of England, were expecting.”
Silvestrin said there was a great deal of uncertainty about why home mover transactions were so low but highlighted the lack of housing supply and the low level of stock on estate agents’ books, properties not being the ‘right ones’ for home movers to move into, and the wide divergence in prices across the region which was getting worse and creating a more pronounced North/South divide.
Glimmers of hope for home movers as well as first-time buyers in the future
Home mover activity would eventually improve, according to Silvestrin. “Activity is expected to increase gradually mainly when more first-time buyers come to the market, kicking off a chain and allowing more homeowners to move,” he said.
The outlook however for first-time buyers was also deemed to be less than sparkling with demand impacted by affordability constraints particularly with house price to earnings levels being high compared to the historical average. “Regionally there is quite a big difference in terms of this measure; with affordability stretched particularly in London and the South East,” said Silvestrin.
There was however some positive news for first-time buyers – mortgage payments as a percentage of take home pay are currently in line with the long-term average, 30 per cent while recent moderations in house price inflation mean they are now roughly in line with earnings.
Silvestrin did however highlight the major risk across the entire UK housing market – the continued poor level of new housing supply coming to market, particularly when compared to the number of new households likely to be formed over the course of the next decade. “The number of new housing starts is nowhere near enough to satisfy demand; it is anticipated that we will have 250,000 new households per year between 2015 and 2025,” he said. “The biggest risk is this imbalance between housing supply and household formation – it will likely lead to increases in house prices.”
FSE London is taking place today and tomorrow at Old Billingsgate in the heart of London’s Square Mile. Alongside the seminar sessions it will offer delegates access to a range of lenders, providers and distributors actively looking to build relationships with the adviser community. Over 70 exhibitors will appear including lenders such as Accord, Lloyds Banking Group, Halifax Intermediaries, Santander for Intermediaries, Skipton Building Society, Virgin Money, and many more.
