Nobody reading this should need reminding that turnover in the housing market is lower than it should be. It is flat or, at the very least, trending slightly downwards, a pale shadow of its former self, as compared to pre-crisis levels.
This is the reality, and in analysing it, I have tended to focus on high transaction costs, including Stamp Duty, a lack of buyer confidence and, in some parts of the country, serious affordability issues.
There is another issue, however, and at the recent Housing Market Intelligence conference at which we were both speaking, Jackie Bennett, head of mortgages at UK Finance, described it. UK Finance includes the old Council of Mortgage Lenders.
That additional issue is the longer duration of mortgages these days. Once, it was common for pretty much everybody to borrow for a 25-year term. Now it is not. Two-thirds of first-time buyer (FTB) mortgages are now for terms of more than 25 years, compared with 37 per cent in 2006, according to the Financial Conduct Authority (FCA).
Existing homeowners join the club
It is not just FTBs who are borrowing for longer. More than 41 per cent of all new mortgages are for 25-year terms and beyond, so existing homeowners are also joining the club in longer-term borrowing.
When it comes to 30 year-plus mortgages, the proportion for FTBs has risen from 20 per cent to more than 40 per cent since 2010, while for movers it has gone up from 5 per cent to 20 per cent over the same period. The median mortgage term for a first-time buyer is now 30 years.
This has consequences. FTBs are getting older, if not as dramatically older as some suggest, and they are borrowing for longer, often because that is the only way to afford the monthly payments. Older borrowers are also opting for longer mortgage terms.
While it used to be the case that people aimed to have their mortgage paid off well before retirement, typically in their fifties, a mortgage that lasts beyond the expected retirement age is becoming common.
Around 30 per cent of mortgages now mature when the borrower is aged 66 or over, a phenomenon that that has been increasing in recent years.
While many more people are working into what used to be regarded as their prime retirement age – roughly 1.3 million people in the UK are still in work beyond the age of 65 – there is still something slightly abnormal about continuing to pay off a mortgage at older ages.
Along with poor pension provisions, it may help explain why people feel the need to carry on working even longer.
It is not hard to see why longer-duration mortgages have a depressing effect on housing turnover. The psychological effect of borrowing for 30 years or more is supposed to limit the appetite for doing so again. This applies to FTBs, but it applies more particularly to home-movers.
No appetite for more
If the only way of affording the monthly payments after trading up in the housing market is by taking out another long-term mortgage, which would run even further into post-retirement age years, it is not surprising that the appetite is suppressed.
There is another reason, highlighted by Jackie Bennett. The overwhelming majority of mortgages are repayment loans nowadays. Only four per cent are interest-only, which sits strangely with some, as this category dominated the market once upon a time.
The way a repayment mortgage is structured, particularly a longer duration mortgage, is that very little of the capital is paid off in the first few years; that process starts later. The result of this, particularly at a time of subdued house price inflation, is that homeowners take longer to build up any equity.
Having made the great effort to get on the housing ladder, or climb up a rung, homeowners are in no position to go further very quickly.
Will this change? We are in a period of adjustment.
Most people probably still have a shorter working life in mind, as opposed to one that takes them to their late-60s or beyond. Long duration mortgages, therefore, look scarier than they need to. But there is little doubt that, for the moment, they are a factor constraining housing turnover.