mortgages

Bitesize: How far do people move house?

Published by Anonymous (not verified) on Thu, 17/10/2019 - 7:00pm in

Fergus Cumming and Alastair Firrell

When moving house, people often don’t move too far away. Many will be commuting to the same job or don’t want their kids to move school. But many people move long-distance when they sell one house and buy another.

Using transaction data on residential mortgages we estimated the distribution of house move distances for 2018. Although England and Wales have good Land Registry data, it is often difficult to understand the links in the chains. We find the distribution of
move-distances is remarkably spread out compared to other estimates. The median mortgagor move is 95km: that’s York-Sheffield, or London-Oxford. Nearly a quarter move over 200km.

Figure 1: Number of mortgaged moves in each 20km distance bucket

What’s driving this? The chart below shows that the highest-income households are likely to move shorter distances, perhaps because they are less financially constrained in their employment or spending choices. A regression of important characteristics suggests that for every £1,000 increase in annual household income, people tend to move about 750m less, all else equal.

Figure 2: Mortgagors with highest incomes move shorter distances more often and longer distances less

Even the poorest mortgagors tend to be less financially constrained than the population at large. But it’s not all about income, there are regional differences too.

This approach has limitations. We only capture mortgage-to-mortgage transactions, so no moves to or from rental, or cash buyers. Therefore we see less about young people (e.g. finding early-career jobs) and older people (e.g. retirement home choices). Our matching algorithm cannot always uniquely identify movers; we take the minimum distance of possible matches. Even so, there are a remarkably high number of
long-distance movers.

Fergus Cumming works in the Bank’s Monetary Policy Outlook Division and Alastair Firrell works in the Bank’s Advanced Analytics Division.

If you want to get in touch, please email us at bankunderground@bankofengland.co.uk or leave a comment below.

Comments will only appear once approved by a moderator, and are only published where a full name is supplied. Bank Underground is a blog for Bank of England staff to share views that challenge – or support – prevailing policy orthodoxies. The views expressed here are those of the authors, and are not necessarily those of the Bank of England, or its policy committees.

Bitesize: Fixing ideas – The Slowing of Interest-rate Pass-through to Mortgagors

Published by Anonymous (not verified) on Fri, 27/09/2019 - 6:00pm in

Fergus Cumming

When choosing a mortgage, a key question is whether to choose a fixed or variable-rate contract. By choosing the former, households are unaffected by official interest-rate decisions for the length of the fixation period. We can use transaction data on residential mortgages to get a sense of how long it takes interest-rate decisions to filter through to people’s finances.

The chart below shows how interest-rate pass-through has changed over time. The green line shows how long the average new mortgagor has to wait before monetary policy decisions affect monthly repayments. Before the Financial Crisis, people had just over a year to wait before their payments adjusted to changes in Bank Rate. Today, people wait almost three times as long.

This remarkable change in policy transmission is driven by two forces, shown in the chart below. First, the proportion of people taking out variable-rate mortgages has fallen from around a third in the Great Moderation to less than 1-in-20 today. Second, people are choosing to fix their rates for longer. This could be because interest rates are expected to rise gradually over the next few years from today’s low levels. There is also a certain attraction to minimising interest-rate risk when the world looks so uncertain.

Longer-term fixed-rate products are available in many countries (e.g. the 30y fix is common in the US). It is nevertheless interesting that mortgaged households in the UK have never been more insulated from interest-rate changes than they are today.

Fergus Cumming works in the Bank’s Monetary Policy Outlook Division.

If you want to get in touch, please email us at bankunderground@bankofengland.co.uk or leave a comment below.

Comments will only appear once approved by a moderator, and are only published where a full name is supplied. Bank Underground is a blog for Bank of England staff to share views that challenge – or support – prevailing policy orthodoxies. The views expressed here are those of the authors, and are not necessarily those of the Bank of England, or its policy committees.