Housing futures: owner occupation Bob Pannell www. cml. org. uk COUNCIL of MORTGAGE LENDERS 1
FTBs summary COUNCIL of MORTGAGE LENDERS 5
Estimated number of FTBs COUNCIL of MORTGAGE LENDERS 6
Age composition of FTBs COUNCIL of MORTGAGE LENDERS 7
Age profile of home-owners, England COUNCIL of MORTGAGE LENDERS 8
Preference for home ownership, % of under 25 s COUNCIL of MORTGAGE LENDERS 9
Trends in tenure, England COUNCIL of MORTGAGE LENDERS 10
Market implications: sustainability • More private rental may suit lifestyles and careers • Less home ownership among young may suit financial capability/household finances • Later home ownership may mean mortgages extending into retirement • Ability/willingness of next generation FTBs to help their own kids COUNCIL of MORTGAGE LENDERS 11
Market implications: fiscal issues • At some point renters want to become home -owners • Concerns that PRS revival is “crowding out” FTBs • Pressure to address alleged favoured tax treatment of BTL COUNCIL of MORTGAGE LENDERS 12
Market implications: social polarisation • High house prices have meant larger deposits needed • FTBs have higher incomes • FTBs rely on parents to help financially – higher % of FTBs have parents who are home-owners COUNCIL of MORTGAGE LENDERS 13
Market implications: less liquid housing market • Affordability problem for movers – no longer case that growth in housing equity will fund a new larger deposit and income growth will support a mortgage large enough to bridge the gap, finance refurbishments/white goods etc • Higher rates of SD act as disincentive to moving house (likely to be even greater during market slowdowns!) • Growth of BTL, where tax system favours a buy, hold and expand portfolio strategy • Result is fewer housing sales - CML forecast is 1 m in 2008, lowest level in absolute terms and relative to stock for 30+ years COUNCIL of MORTGAGE LENDERS 14
Market implications: overreliance on housing equity • Housing finance an intrinsic part of household finances • Limited savings culture • Increasingly rapid, easy and low-cost release of funds • Growing fungibility of housing equity enhances personal coping strategies • Vulnerability of households to housing market slowdown or less liquid housing market • What if government succeeds in lowering house price inflation? COUNCIL of MORTGAGE LENDERS 15
Market implications: monetary policy • % of outright OOs has increased • Rising house price values underpinned by imposing greater debt burdens on highly leveraged households – the young or financially distressed • Low inflation means incomes are not rising strongly • This complicates monetary policy and imposes upper limits on scope for base rates without causing real pain COUNCIL of MORTGAGE LENDERS 16
Market implications: regulatory pressure • Mortgage lenders have responded to changing economic environment - relaxation of lending criteria, reducing mortgage margins, and restructuring repayments over a longer period, promoting IO loans etc. • Such actions allow individuals to borrow more, but in aggregate underpin higher house prices • Increasing challenge from FSA on TCF and affordability grounds COUNCIL of MORTGAGE LENDERS 17
Do you think something should be done to make it easier for young people to buy their first home? COUNCIL of MORTGAGE LENDERS You. Gov Survey Results Sample Size: 2414 Fieldwork: 14 -16 November 2006 20
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