Home movers overtake first-time buyers to drive housing market

Home movers flush with housing equity left first-time buyers trailing as drivers of the UK housing market in the first three months of 2021, as the stamp duty holiday and the “race for space” led to a switch in the long-term balance of demand. 

Mortgage completions for home movers were up 82 per cent in the three months to March compared with the first quarter of 2020, according to a report by UK Finance, the banking industry group, while completions for first-time buyers were 31 per cent higher than last year. 

The surge in buying among home movers accelerated during the quarter, with 142 per cent more mortgages completed in March 2021 than a year earlier.

The latest figures suggest a reversal of the long-term balance of activity between home movers and first-time buyers, breaking a pattern which UK Finance said dated back more than a decade.

After the financial crisis, first-time buyers drove demand, supported by a series of government initiatives, and had recovered their pre-crisis levels of purchasing by 2018. Buying among home movers, by contrast, remained subdued, with their buying activity at roughly half its 2007 level in the subsequent decade. 

Line chart of Three-month moving average, year-on-year change (%) showing UK mortgage applications and completions

Since coronavirus struck, however, “there looks to be a more fundamental shift in behaviour linked to the pandemic”, UK Finance said, pointing to the impact of the homeworking trend and high levels of housing wealth.

“The ongoing health crisis has brought with it a need for space during lockdowns which existing homeowners, supported by over a decade now of uninterrupted price growth increasing their housing equity stakes, have been well placed to respond to,” it said.

The link with housing equity was underpinned by its regional data, which showed the strongest growth rates for home movers were in the southern regions of England, areas where prices had shown the biggest rises over the decade. 

In the Southeast, the number of home mover mortgages rose by 110 per cent in the first quarter compared with the same period in 2020. In East Anglia, the Southwest and London they rose by 91 per cent, 90 per cent and 85 per cent respectively, compared with less than 50 per cent in Scotland and Wales. 

“Equity stakes are strongest in London and the southern regions, where up to 60 per cent of borrowers own at least half of their home’s equity outright,” it said. In the Southeast, more than half of borrowers have £250,000 of equity; in London, one-fifth have more than £500,000, “more than enough to buy an average priced property in every other region of the UK”.

Home movers were not only moving out, but moving further afield than in the past, the report said. Using their store of equity and mortgage borrowing, they were seeking bigger accommodation in better locations.

Nationwide, which this week said UK house prices had risen 10.9 per cent in the year to May, said one-third of those moving or considering a move were looking to move to a different area, while nearly 30 per cent were doing so to access a garden or outdoor space more easily. “The majority of people are looking to move to less urban areas,” it added.

UK Finance said it was not yet clear whether the homeworking trend would become a permanent feature of the working environment. However, Neal Hudson, research director of market research company Residential Analysts, said the fact that many companies had shown it was possible for their staff to work from home either full-time or part-time suggested the hybrid model of working was likely to be sustained beyond the pandemic. 

“The genie’s out of the bottle,” he said. “It will be very difficult to go back to where we were.”

If it did prove permanent, UK Finance said, this could lead to “some rebalancing of property prices more evenly across the country”.


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