A ‘lost generation’ of house hunters may never get on the property ladder, the boss of Nationwide has warned.
Rock-bottom interest rates have fuelled a property price boom that has left families locked out of the market and urgent reform is needed, Joe Garner said.
He added that an estimated one million aspiring homeowners have been unable to get on the ladder since the financial crisis because the cost is too high.
‘Lost generation’: Rock-bottom interest rates have fuelled a property price boom that has left families locked out of the market
The 49-year-old chief executive described them as ‘truly a lost generation of aspiring homeowners’.
Garner’s comments came as Philip Hammond yesterday extended the Help to Buy scheme by two years to March 2023.
The extension will only apply to first-time buyers, however. Plunging rates of home ownership mean England has a higher proportion of renters than France or Spain.
The crisis has been particularly severe for those aged between 25 and 34. Three decades ago, 50 per cent of this age group owned a home. Today the figure is just 35 per cent.
Garner said: ‘Is this because young people no longer want to own their own home?
‘No. It’s not that they don’t want to, it’s because many can’t.
‘And the resulting disenchantment with society as a result could become problematic if we do not do something about it.’
The problem is particularly acute in London, where massive prices mean that someone on the average wage in the capital takes a decade longer than elsewhere to afford their first home. Garner argued that part of the responsibility for the collapse in home ownership lies with record-low interest rates set by the Bank of England during the crisis.
The building society boss said: ‘This was an essential policy decision to stabilise jobs and the economy but it also left investors seeking new homes for their money. Quite literally.
‘Buy-to-let became a much more attractive investment, and buy-to-let landlords had the advantage over first-time buyers because many were cash purchasers.
‘They could use equity in properties they already owned to expand their portfolios.’
Bank of England figures showed 65,269 mortgage approvals were made to home buyers in September, falling from 66,101 approvals in August.
Nearly 71,000 mortgages were approved for house purchase in September 2015.
Howard Archer, chief economic adviser to the EY Item Club, said: ‘Mortgage approvals still look relatively sluggish.
‘It is evident that the housing market is struggling for traction in the face of still limited consumer purchasing power, fragile consumer confidence and wariness over higher interest rates.
‘We suspect that the housing market will be relatively lacklustre over the coming months.
‘The downside for house prices should be limited by the shortage of houses for sale.’