This isn’t purely the result of a more intense regulatory environment of course, but a new culture of tighter rules and wary regulators have certainly been fundamental in slowing the marketplace down.
While IMLA predicts that gross lending will increase by 3% in 2015 to £210bn, this will be underpinned by strong macro-economic factors, such as continued low interest rates, rising real incomes and low inflation.
Without these factors providing the market with buoyancy, the collective negative impact of poor housing affordability, tighter restrictions and the Financial Policy Committee’s stress testing recommendations may undoubtedly have more severe implications.
Despite the positive increase in gross mortgage lending, mortgages seem to be providing a smaller proportion of finance for housing transactions. Mortgage finance’s share fell to just 41.7% of the total value of housing transactions in 2014, and IMLA estimates that this will fall to under 40% by 2016. As mortgage finance becomes less prevalent, and prices continue to rise, the outlook for less affluent and first-time buyers becomes gloomier.
Drastic reduction in stock
Along with this shift from mortgage finance to cash dominating house purchases has come a drastic reduction in the turnover of UK housing stock. The typical home now changes hands every 23 years, rather than the eight-year average seen in the 1980s, with middle-aged homeowners increasingly choosing to stay put and houses becoming increasingly concentrated among fewer homeowners.
The increasing importance of cash, lower housing turnover, and rising house prices are a problematic combination for less affluent would-be buyers.
More needs to be done by policymakers to ensure that the market is accessible to this group, and while increased mortgage market regulation isn’t solely responsible for the problems facing them, a better balancing of this regulation with consumers’ needs for finance would go a long way.
Peter Williams is executive director of IMLA
