Monetary Policy Committee member David Miles predicts that the average age of first-time buyers may rise to 44 if the property slump continues.
Leading economist David Miles has warned that house prices may not recover from their current stagnation and the average age at which people buy their first home is likely to rise to 44.
Miles is a member of the Bank of England’s interest rate-setting Monetary Policy Committee.
Despite this gloomy prediction, he added that we should not regret the housing situation that the credit crisis has created.
Stable house prices=stable economy?
Miles said that the economy could “become more stable” if we were less reliant on house price changes and mortgage rates.
And he argued that more people renting aided social mobility and reduced “the risks of structural unemployment”.
“In the longer run it is not at all clear that a lower rate of home ownership represents a big loss to society,” he told a conference in York.
Miles calculated that, if the deposits required for the average mortgage are 20%, a prospective buyer saving 5% of his or her annual income a year from the age of 28 won’t be able to get on the property ladder until they are in their mid-forties.
Storm clouds already gathering
The Eurozone crisis is already threatening to bring an end to cheaper mortgage rates, as swap rates increase, an issue we covered in detail in this article.
And, as many of us know all too well, lenders have tightened up their lending criteria, meaning larger deposits are already required.
The Government has announced a raft of measures designed to kickstart the housing market. These include building more homes, underwriting some mortgages so that buyers only require a 5% deposit and selling social housing. We looked at these in this article.
But while Miles’ comments might be bad news for prospective first-time buyers, if his predictions come true buy-to-let investors can expect to profit from the increased number of renters.
Do you think our economy is too reliant on house prices? Will fewer homeowners be a bad thing? Let us know your views via the comment box below.
More: Government to help borrowers buy with 5% deposit | How to rent out your home
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