Mark Webster is business development director, Capita Mortgage Services
The “housing shortage”, the “housing crisis”, and “generation rent” are all terms that have appeared in abundance in the trade press over the last year or so. It seems as though there are some good vibes emerging, with house building at its highest rate since 2007 and construction staff employment being undertaken at is fastest pace since 1997. So more homes being built than before and lending for purchase of these homes increasing 19% year on year, sounds great!
Dig further down into the foundations though and a worrying future lurks. The obvious debate around where these houses will be built rages on, with continued urban sprawl, the green belt versus brown belt and new town concepts all with pro’s and con’s. However, the concern I want to consider is the future impact on mortgage lending volumes when generation rent becomes the dominant target market (aged 35-50).
The types and location of property being built now has to achieve a fine balance between those that are built to rent, those that are in the affordable housing bracket and those that are aimed at the first time buyer (through a government scheme or otherwise). With more emphasis placed on the private rental sector now, future mortgage lending must be placed under pressure.
For the twenty somethings of today, not only is the average cost of renting cheaper than buying, but the availability of a mortgage is decreased through tighter mortgage regulation post-MMR that now also considers lifestyle spending much more than before. Add to the mix a lack of savings, and not enough income to provide for pensions, and we face a generation of people that will need to pay rent throughout later life as well as support their lifestyle.
I like to consider myself a “glass half full” person, so let’s look at the answers to the problem! One answer has to be the continuation of Help to Buy schemes, in various guises to make buying a house as appealing and available as renting one. Then an answer has to emerge from the “land” debate around where these houses are going to be built. However the two main factors I consider most important for generation rent are salary increases, hinted at by Mark Carney during the recent TUC conference to allow mortgage payments to represent a lower percentage of income, and further education and understanding around pensions and savings. Both factors require action sooner rather than later to prevent a compounding of these issues in the future.
If we want to see sustained mortgage lending volume in the future (outside of buy to let!), we have to convert “generation rent” into “generation buy”.