The trend has been influenced by factors including low inflation, longer mortgage terms and increased life expectancy, a new joint report from UK Finance and Hometrack, The Changing Shape of the UK Mortgage Market, has shown.
Part one of the report looks at how the housing market context for mortgage lending has changed in the decade since the financial crisis.
Homeowners accounted for their lowest share of housing moves at 35 per cent of the market in 2018, compared with 37 per cent in 2013, the analysis found.
Trading down has become less attractive given price compression between, and undersupply of, two- and three-bedroom homes. This has led to homeowners being unable to withdraw sufficient amounts of equity to justify a move.
In the future, homeowners would be likely to move for reasons such as employment or a change in circumstance rather than “taking on greater mortgage debt for purely aspirational motives,” the report said.
Housing market decline
House price rises outstripping income growth, as well as tax changes, had resulted in a four per cent decline in house sales between 2016 and 2018, the report said. High-value markets saw a sharper, double-digit drop.
In the coming years, volume sales were expected to remain at between 950,000 and 1.1 million, with volume and pricing continuing to adjust to affordability constraints and policy changes.
FTBs to remain largest group
First-time buyers (FTBs) took their highest share of housing sales since 2007, with for 36 per cent of sales and 50 per cent of mortgages for home purchase.
The report suggested a material change in the current mix of purchasers was unlikely in the coming years. The existing mix was put at 35 per cent for FTBs and homeowners, even per cent for buy to let borrowers and 23 per cent cash buyers.
Help to Buy concerns
Help to Buy-related changes to national planning guidance in 2012 had supported new housing delivery, the report said.
New builds accounted for 15 per cent of housing sales by value in 2018, double the level in 2011.
Loans on new homes accounted for 17 per cent of gross lending for home purchase in 2018, up from 13 per cent in 2016.
However, the proposed end of Help to Buy posed a “major challenge to growth in new housing delivery,” because buyers would then have to fund a full deposit and meet maximum loan to value criteria changing the affordability dynamics, the report said.
It added that builders had already bought land and were planning new schemes in anticipation of the end of Help to Buy. This would likely lead to lower-end sales values and more conservative assumptions for sales rates. This reflected reduced demand and buying-power among home purchasers.