The trade body also forecast in its annual market review that gross mortgage lending will grow again over the next financial year to reach £265bn, its highest level since 2007, but this is to be underpinned by remortgaging – rather than movers.
Remortgage activity is expected to hit £94bn in 2018/19, up 4.4%, and will make up 35.5% of total lending.
A shortage of properties, very low levels of turnover and obstacles to both first-time buyers and so-called second-steppers remain significant challenges for the market, the report added.
Ageing home owners, with the typical age increasing from 52 to 57 over the past 20 years, have “profound ramifications for the mortgage market”, IMLA said.
Households moved once every 7.4 years at the peak of transactions in 1988, but this rate has now more than doubled, IMLA said.
In part this is down to the growing number of older home-owners with little or no reliance on mortgage finance who want to remain in their properties, with consequential knock-on effects for second steppers, the reported added.
Mortgage debt has reduced role in housing market
Mortgage funding for house purchases has dropped from 52% in 2006 to 41.5% in 2017, according to IMLA’s analysis.
And homeowners’ increased equity has reduced the role of mortgage debt in the overall market, with the aggregate loan-to-value (LTV) ratio of the housing market below pre-financial crisis levels at 26%.
Kate Davies, executive director of IMLA (pictured), said: “We are witnessing a step-change in the market, as the shifting demographics of homeownership and the housing supply shortage create a structural break with what has been the norm.
“Despite the recovery of the housing market and the availability of mortgage finance since the last recession, stricter affordability rules are limiting activity by those who would otherwise be highly leveraged.
“Transactions levels have fallen and there is evidence of more cash being injected into home purchase.
“People are moving less often – whether by choice or constraint.”
She added that home movers, or steppers, in particular faced a number of hurdles including high house prices relative to earnings, stricter mortgage affordability criteria and a lack of suitable homes – which was holding back housing turnover and transaction volumes.
“It’s important that government now recognises the demographic and socio-economic changes that have influenced the direction and makeup of the housing market,” Davies added.
