UK house prices enjoyed the fastest rate of growth in January, but leading mortgage lender, Nationwide say that the low number of first time buyers is a “cause of concern.” The government backed Funding for Lending Scheme which was launched in August last year has made cheaper mortgages widely available, but with the average house
price in the UK costing £162,245, young people are still being priced out of the market.
In the past first time buyers have accounted for 40% of housing transactions with around 32,000 buyers a month in England and Wales. Since the housing market collapsed in 2007 that figure has dropped to around 20,000. Despite FLS making mortgages more accessible to buyers, banks are still demanding a 20% down payment which first time buyer´s cannot meet.
Despite the Nationwide describing the UK housing market as concerning they do believe there are “encouraging signs” thanks to the Bank of England´s Funding for Lending Scheme that allows mortgage lenders more access to more than £80bn of low interest finance. The scheme has helped to fuel the housing market in the last few
months but in doing so will also cause house prices to gradually rise.
Soaring UK house prices
The current housing situation in the UK has to be one of concern for future generations. We are currently in what has been dubbed the “Boomerang Age” whereby teenagers leave the family home to attend University, but return back to their parent´s home with huge debts and no chance of securing a mortgage. Even if they find employment increased rent prices and high repayments on student loans is a strain on their income.
The inevitability is that children will be living with their parents well into their twenties, if not their thirties. Some parents are taking out second mortgages to help get their children on the property ladder, but this could ultimately affect their retirement funds. FLS has made interest repayments on mortgages affordable for now, but they will increase in four years and is likely to cause financial distress for borrowers.
Another scenario is people who choose to rent may be doing so for years and never actually own their own property. This will decrease the value of their estate and children of future generations will not receive much inheritance. In turn they will not be able to afford their own property either. If UK house prices continue to rise and young people
are so saddled with debt they cannot afford a mortgage, future generations in Britain will never own property.