Mortgage blog: Only a third of young people will own their own home by 2020
New research has found that continuing issues with access to low-deposit mortgages could result in just a third of young people owning their own home by the year 2020. The Intermediary Mortgage Lender's Association says that 25- to 34-year-olds are likely to face ongoing difficulties accessing the mortgages they need to buy houses and flats over the next few years, with the result that homeownership among young people is set to fall to half the level seen 20 years ago.
We look at the problems facing first-time buyers and how changes to the mortgage market are set to make it difficult for young, aspiring homeowners.
Changes to mortgage rules set to make it tough for young homebuyers
The Intermediary Mortgage Lenders Association (IMLA) represents mortgage lenders operating through brokers. Their new research shows that due to problems accessing mortgage finance, only around a third of 25- to 34-year-olds will own their own home by the end of the decade. The Daily Telegraph reports that this "would be little more than half the level seen back in 1993".
Access to home loans is set to be the biggest challenge facing young buyers, according to the IMLA. "In essence, the regulatory response to the financial crisis and the industry's partially self-imposed caution has ‘hardwired' in a lower level of homeownership", it said in a report.
Keith Osborne, editor of WhatHouse.co.uk, says: "While the government has temporarily eased access to cheap funds through initiatives such as Funding for Lending, there are changes to the mortgage market on the horizon that will hit young buyers hard. Regulatory requirements on banks are likely to restrict the availability of low-deposit mortgages in the future while changes to rules in the UK will require lenders to carry our more stringent affordability checks on buyers. Combine this with the end of the Funding for Lending scheme in 2015 and the situation looks like it could be hard for first-time buyers across the UK."
The IMLA predicts that the level of mortgage lending seen before the crisis - up to the £360bn gross lent in 2007 - will not be repeated. Instead, it believes the ‘new normal' might be for less than £200bn a year.
Peter Williams, the IMLA's executive director, said the ambition of homeownership "has become a key part of our national identity. But this goal threatens to disappear from view unless we consider what kind of market we want to create for the future and what can be achieved within the scope of mortgage regulations and available finance."
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