The mortgage market enjoyed a record year in 2016, with rates hitting record lows on a seemingly monthly basis and product choice largely improving across the board. As such, it may come as a surprise to hear that the number of people moving home has fallen for the first time in five years, according to the latest Lloyds Bank Homemover Review, with fewer apparently taking advantage of the market.
The figures show that the number of homemovers is estimated to have reached 354,000 in 2016, a drop of 4% from 2015, when homemover numbers totalled 367,300. This is the first annual decline since 2011 and follows four successive years of growth, so the latest downturn certainly wasn't expected.
We're still some way below peak levels of homemoving, too: the current number of homemovers may have grown by 12% since its recent low point in 2009 (when the number of people moving home was 315,000, the second lowest since records began), but it remains 50% below the level of 712,000 recorded a decade ago.
"Despite favourable economic conditions including record low mortgage rates, high employment levels and rising real pay growth, the number of homemovers fell in 2016 for the first time in five years," said Andrew Mason, Lloyds Bank Mortgages director.
He explained that much of this could be due to the lack of the "right type" of homes for those looking to move up the housing ladder, so even though rising house prices mean current owners have more equity – so could comfortably move up the ladder should they wish – the lack of suitable homes means it isn't always so simple.
Unfortunately, this lack of homemoving could be clogging up the market elsewhere, as Andrew explained: "The ability of homemovers, particularly those in their first homes, to move on is an important component in the housing market, as it increases the supply of properties, providing homes for new first-time buyers."
Then there's the fact that, while rising house prices can be helpful for current owners, it also means the house they want to move to could be far more expensive than they had bargained for. Indeed, the average price paid by homemovers last year rose by 7% year-on-year, up from £273,510 in 2015 to a record high of £291,777. As a result, average homemover deposits have also risen, up to £96,968 last year, an increase of 6% year-on-year, and equivalent to 33% of the average price of a typical homemover property.
However, longer mortgage terms and low rates are helping to keep repayments under control: last year, 39% of mortgages were for a term of between 25 and 35 years, while the number of mortgages for terms of five years up to 25 years stood at 61%. This is in stark contrast to a decade earlier, when 83% of homemovers had a mortgage term of between five and 25 years, and only the remaining 17% were for over 25 years.
Meanwhile, record low mortgage rates have helped reduce the proportion of income spent on repayments: in the final three months of 2016, mortgage payments accounted for 38% of homemovers' disposable earnings, a substantial fall from the peak of summer 2007, when average mortgage outgoings accounted for 57% of disposable income.
This means that affordability issues should be kept to a minimum, but with signs of mortgage rate rises on the cards, this may not be the case for long! If you've been toying with the idea of taking the next step on the housing ladder, now could be a great time to go for it, so check out the top mortgage deals and see if you can fund your next purchase without spending a fortune in the process.
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