The proportion of house purchases, which were financed by a mortgage, dropped to an all-time low of 41.7 per cent, according to a new report by the Intermediary Mortgage Lenders Association (IMLA).
This means that only £4.17 out of every £10 spent on a home purchase came from a mortgage.
The majority (58.3 per cent) of transactions were funded by either cash or equity and, according to IMLA, this trend is bound to continue. By 2016, the proportion of home buys funded by cash or equity is projected to reach its highest level on record, of 60 per cent.
The report also reveals that currently the average property in the UK changes its owner every 23 years, which is almost three times longer than in the 1980s, when homes were sold every eight years.
The low housing turnover stems from the combination of a few factors, IMLA says. People now are buying their first home later, the private rented sector is larger and turnover there is lower and on top of that there is a big number of middle-aged homeowners who are “hoarding” their properties. These factors will have an impact on the property market at least for the foreseeable future and are likely to limit mortgage lending and restrict access to existing homes.
Peter Williams, executive director for IMLA, commented:
“These figures paint a picture of a housing market where turnover has drastically slowed in the last thirty years. Quite simply, in the absence of a sustained rise in housebuilding and improved affordability and turnover, the fact that properties are coming onto the market less frequently severely limits the scope for would-be first time buyers to graduate to owning their own homes.
“Inertia in the property market spells danger for future owner-occupation levels, and the growing influence of cash and equity is sowing the seeds of a permanent social divide. Having said that, we will see some continued growth in mortgage lending – and as the market stabilises and wages rise, we may also start to see affordability improving.”
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