Alan Hollinghurst lives in a light and preternaturally quiet flat on Parliament Hill in north London. When his novel The Line of Beauty won the Booker prize in 2004, he spent some of his winnings on revamping it, with the result that it has a new, large sitting room with a lush view out on to a corner of Hampstead Heath. Furniture is sparse (he likes to joke that the money ran out before he could stretch to armchairs), but there are pale carpets and good paintings and – what's this? – a strange plaster relief, in an elaborate gilt frame, of the face of a (presumably long dead) young woman.

I move towards it excitedly, as if I were the first visitor ever to notice it. Beneath her profile is written her name: Daphne. Crikey. Was this a source of inspiration for Daphne Sawle, one of the most important characters in The Stranger's Child, his fifth and most recent novel? He smiles, indulgently. But, no. He bought it at auction just as he was finishing the book, by which time Daphne Sawle was every bit as real to him as this fine-boned, turn-of-the-century creature.

Hollinghurst is all indulgent smiles today, which is just as well because I've got the jitters. The Stranger's Child, a capacious and wonderful book that begins in one suburban garden in 1913 and ends in another in 2008, has many themes. It is about love, and the passing of time; it is, too, about ambition, taste and disappointment. But more than anything, it is about the unknowability of human beings, and the misunderstandings, even the danger, associated with trying to plug the gaps in our perceptions.

Its nastiest and perhaps most memorable character is Paul Bryant, an enterprising hack reviewer and the would-be biographer of Cecil Valance, the Rupert Brooke-ish figure whose short life and long but ever-shifting literary reputation crouches at the heart of The Stranger's Child.

Bryant, like me, makes a living poking around in people's lives – and I have the impression that his creator disapproves. When he goes to stay with Daphne Sawle, for whom, when she was a girl, Cecil Valance wrote a famous poem, she likens him to a "little wire-haired ratter"; she knows, even before he has lobbed his first question, that all he is interested in, basically, is "smut". When Paul asks her if he might tape their conversation, Hollinghurst writes of the recorder's "odd insinuations of flattery and mistrust". He then lists, highly accurately, the various ways interviewees respond to it: some made awkward, as if it were an eavesdropper; others reassured to a degree that results in a kind of verbal incontinence.

I place my own tape recorder down on the small table beside us. I half expect it to explode, like a grenade. So, does he loathe Paul?

"Well, I wanted to depict him changing," he says, carefully. "And one knows how sweet young people can turn into monsters and bores." They curdle. "Yes, exactly. They curdle."

What about biography? Does he disapprove of it? "No, of course not. I love biography. But as with the novel, there's a great range between the great and the crap. A great biography is like a great novel; it has a deep sense of wisdom about life. I'm quite amused, though, and sometimes frustrated, when someone ends up with the wrong biographer.

"I'm potty about Ronald Firbank, and the first person to have access to all his papers was this woman, Miriam Benkovitz. She was in a position to do something wonderful, and she wrote this utterly inane book – and, of course, a minor literary figure is unlikely to have their life written again, so it feels like a waste. The same thing happened with Denton Welch [the writer and painter, who died in 1948]. There was this very slipshod biography by Michael De-la-Noy."

The Stranger's Child came out last year (it is published in paperback this week) to almost universal praise; the only criticism anyone seemed to be able to level at it was that it isn't The Line of Beauty. But then... controversy! The novel was left off the Booker shortlist, and thus became the focus for discontent with the prize and its supposedly lowbrow leanings; soon after, the literary agent Andrew Kidd announced that he hoped to establish a new, more serious fiction award (although, so far, nothing has yet happened on this score).

How did Hollinghurst feel about this? "I didn't say anything [at the time], and it's hard for me to say anything about it now because it sounds like I'm saying: I should have been on the shortlist."

But? "But there were a lot of books that should have been on the shortlist – Teddy [Edward St Aubyn, author of At Last] and Philip Hensher [King of the Badgers] and probably a lot of other books I haven't read, too. One can take a position about the shortlist in almost an objective way. But I also learnt, a long time ago, to be aloof from these things. You realise how arbitrary they are. It's lovely if it works out for you, but it doesn't mean anything, really, except in commercial terms.

"The Booker made me a lot of money. I didn't realise that all over the world, people will read a book just because it won the Booker prize." A delicious pause. "Not something I would do myself... But then one goes into some quite other, private region to produce a book." He gives me a knowing look. "I think the Booker can drive people quite mad. That's why it's good to be detached from it."

Is he in that private region now? I hope so. "I'm in that rather unfocused phase, which is one of discontent with not writing another book. What I'm missing is sitting at my desk and getting into the large alternative space of a book. I've got quite a few bits and pieces, but I haven't quite had the moment of revelation where I see how they fit together. It's always like this: a blur of different things, and then a story emerges."

Does he ever think: I'm not sure I can do this again? "I have an underlying confidence that I won't suffer writer's block or anything. But I never think: oh, this will be a smash hit. I know there are things I can do, but an element of doubt is probably quite important." Is writing painful? For some, it's agony. "Perhaps we tend to overplay the agony side of it. But then, like any pain, when it's over, you can't remember it. So perhaps I'm wrong to say we exaggerate it. What I will say is that there are times when it's just the best thing: the high of things coming to you. You get a peculiar sense of elation, as if nothing else really matters. It's not a sense of smugness. But you're buoyed up. Your mind is wonderfully perceptive. It's a very beautiful feeling."

I can measure out my adulthood not in coffee spoons, but in Alan Hollinghurst novels. Partly, this is because he takes such an age to write a book; the anxious wait means that one's circumstances have inevitably changed by the time he delivers. Partly, it's because I read his first novel, The Swimming Pool Library, which came out in 1988, during my first year at university, that exciting time when I felt life was just beginning to get going. I remember vividly both the deep surprise of it – all that sex! – and my complete inability to put it down, for all that I was supposed to be watching children (I was their nanny).

This is, I think, something the critics rarely point out. They will tell you that his first four novels compose an unofficial history of gay life in Britain (The Swimming Pool Library, which fleshed out – quite literally – the gay world before and after the decriminalisation of homosexuality, was followed by The Folding Star, a study of romantic and sexual obsession; The Spell, a comedy of manners whose twin engines are ecstasy and a certain kind of narcissism; and finally, triumphantly, The Line of Beauty, perhaps the best book ever written about the 80s). They will also, inevitably, claim him as the greatest stylist of our age. But do they ever use the word page-turner? No, they most certainly do not.

He wasn't always going to be a novelist, though. Poetry was his first love. An only child, he grew up in Stroud, Gloucestershire, where his father was a bank manager (he poured this time into The Stranger's Child: Paul Bryant begins his working life in a bank in a small, country town, where he reads Angus Wilson in his lunch hour, and gets turned on by the angle of his stool at the cash desk). At school – his parents sent him to board at Canford in Dorset – Hollinghurst became fascinated by poetical forms.

"We had to do a competition," he says. "The theme was 'the pleasures of life'. I wrote three sonnets." And what were, in his then opinion, the pleasures of life? A low chuckle (Hollinghurst is the drollest, most quietly mischievous man I've ever met – though it's in his eyes and the cast of his mouth and the tone of his voice, rather than in anything he actually says). "I'm not sure I'd actually experienced the pleasures of life, then. So it was a case of.... going for a walk, having a cup of tea, er... a pint of foaming ale!" He laughs. "They were published, with some typos, in the school magazine. Being a poet at school had a certain prestige; it was a source of glamour. And if you could write modernistic poems, which no one could understand, then even more so."

Later on, as a young man, he published a volume of poems, Confidential Chats with Boys (1982) – "intensely rare", he once described it, self-mockingly – but then the muse left him, and he started on The Swimming Pool Library instead. He was 33 when it was published.

Hollinghurst dates his interest in architecture from school, too – and thus, wary though we must be of conflating life and fiction, we can also trace the big houses in his books to this time. "I placed Corley Court [the Valances' home in The Stranger's Child] almost exactly where my prep school had been," he says. "I'd never gone back into that world before [Corley Court later becomes a school], and I realised the memories were so abundant, I could easily have written a 500-page novel only about that – not that I'm going to! My prep school, an early Jacobean house, made a deep impression on me. I could draw an accurate plan of every floor, even now – and all the fireplaces, the plasterwork on the ceilings. I just absorbed it all. You're wonderfully open and suggestible as a boy, though one also goes through agonies. The emotions of adolescence are so extreme."

After a long period at Oxford – he wrote an MLitt thesis on Firbank, Forster and LP Hartley – he came to London, and began working as a reviewer, eventually joining the Times Literary Supplement as an editor. "It was completely unanticipated," he says. "I'd applied for teaching jobs. I had an interview in Edinburgh, and perhaps I'd still be there if I'd got that."

The editor told Hollinghurst, sounding slightly embarrassed, that his salary would be £11,500. "And my father said: that's more than I ever earned, old boy." His parents were reassured by the fact of his working at the TLS – and it pleased him, too, to be able to jump dramatically into a taxi and shout: the Times! (both papers were in the same place ). He went part-time after The Swimming Pool Library came out, and eventually was able to make a living from writing full-time – which is a good thing because he has a problem combining fiction with the rest of life. Hollinghurst is rather sociable. He has been known to go to parties. But once he's deep into a novel, he has to isolate himself. It's for this reason, too, that he has mostly always lived alone.

We talk, before I go, about literary estates. It is a horrible fact that while he was writing The Stranger's Child, in which we see Cecil Valance's reputation wax and wane, different parties claiming him as their own at various times, Hollinghurst's dear friend Mick Imlah, the poet, died of motor neurone disease at the age of 52. Hollinghurst, his literary executor, looked on as people wrote about Imlah, "each of them saying what they thought about him rather as the characters do in the book".

His own literary executor is Andrew Motion (the two of them shared a house in Oxford; Hollinghurst is also Motion's executor). "Oh, yes, I've kept everything," he says. "A couple of American libraries have suggested I might like to deposit things with them. But I don't like the idea of people rummaging about in my drafts. It's embarrassing. Why expose oneself to that? And I don't think you should be too concerned with posterity while you are living your life."

He will admit, though, to enjoying writing his will, when he finally got round to it ("Andrew was much more organised; he wrote his ages before me"). Specifically, he liked the bequest section. So who, I wonder, will get Daphne, with her marble eyes, and her well-bred nose? He laughs, a low rumble of delight. "Yes, that's something I really should think about. I probably need to add a whole new clause for her."