The changing sources of new mortgage debt

A much clearer understanding is needed of the forces driving the current upsurge in the mortgage market and of the key factors contributing to the exceptional growth of mortgage indebtedness. It would then be easier to judge whether the widely-expected downswing in mortgage lending will be reasonably limited and gradual, or more pronounced and protracted.
This paper, by Richard Talbot, develops an appropriate analytical framework and model that traces the composition of incremental mortgage borrowing over the period since the mid-1980s. Estimates have been compiled for the various elements of additional borrowing using data from the Survey of Mortgage Lenders and the Bank of England back to 1993, and other statistics on the earlier composition of bank approvals and building society advances.
This analysis of the debt aggregation process suggests that, at the level of the individual household, people simply will be unable, and indeed unwilling, to go on absorbing the relatively large amounts of incremental debt implied by many medium-term forecasts for mortgage lending.