Financially Excluded Could Revolt

by Mark Johnston

A Bank of England expert suggests that Britain could be faced with another house price boom, fuelled by the ageing population and the rising number of immigrants.

At present, 62.2.million people live in Britain, but the office for National Statistics expects this number to balloon. By 2020, it is expected to hit 67.2 million.

However, many first time buyers feel that they will never be able to get on to the property market to make their first purchase. In current times they will now typically require 2 incomes rather than just the one.

Most potential first time buyers have found themselves trapped in the rental sector with no way out for the foreseeable future.

The growing number of those who can not raise enough of a deposit to get a mortgage are in a worse position then ever before.

Estate agents are now finding that more and more buyers with anything less than a perfect credit history struggle to get a loan.

Experts have warned that changes to the mortgage industry since the credit crunch mean that young people will have to wait longer before they can afford to buy a home because they will be saving for a larger deposit.

David Miles, the Bank of England’s economist, said “the mortgage market has changed in a permanent and very abrupt way, which has been ‘stark’ particularly for new buyers. The first effect is likely to be prospective buyers postponing their purchase, while they save more to accumulate a larger deposit”.

This comes at a time when soaring numbers of families are being forced to rent because they can not afford to buy.

The governments English housing survey shows 16.5% of households in England are renting their homes privately, the highest number since the 1970’s.

Matt Griffiths, from first time buyer campaign Priced Out, warns “a new generation of families will be growing up in insecure rented accommodation”.

A research paper written by the Bank of England’s economist David Miles suggests that an increasingly dense population, rising pressure on house prices and a lack of mortgage lender appetite may now result in new types of lending.

Shared equity and shared ownership could start to gain popularity, while high loan to value (LTV) lending is unlikely to return.

Peter Williams, of the Intermediary Mortgage Lenders Association (IMLA), stated “buying a home at any point in their lives may not be a realistic option now for a higher proportion of ‘twenty something’s’ than has ever been the case since the second world war”.

This generation has also been let down by the destruction of the pension industry, will carry the costs of higher education and have less opportunities in employment,

The exclusion of those in their twenties from the property market and overall tougher living conditions could encourage political activism.

A mortgage trade body suggests that ‘at some point those affected are likely to bit e back, potentially in the form of political action’.

Therefore the likes of the Financial Service Authority (FSA) and the government must be clear on the consequences their actions may create.

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