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Housing futures: owner occupation

Housing futures: owner occupation. Bob Pannell www.cml.org.uk. FTBs summary. Estimated number of FTBs. Age composition of FTBs. Age profile of home-owners, England. Preference for home ownership, % of under 25s. Trends in tenure, England. Market implications: sustainability.

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Housing futures: owner occupation

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  1. Housing futures: owner occupation Bob Pannell www.cml.org.uk COUNCIL of MORTGAGELENDERS

  2. FTBs summary COUNCIL of MORTGAGELENDERS

  3. Estimated number of FTBs COUNCIL of MORTGAGELENDERS

  4. Age composition of FTBs COUNCIL of MORTGAGELENDERS

  5. Age profile of home-owners, England COUNCIL of MORTGAGELENDERS

  6. Preference for home ownership, % of under 25s COUNCIL of MORTGAGELENDERS

  7. Trends in tenure, England COUNCIL of MORTGAGELENDERS

  8. 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 MORTGAGELENDERS

  9. 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 MORTGAGELENDERS

  10. 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 MORTGAGELENDERS

  11. 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 1m in 2008, lowest level in absolute terms and relative to stock for 30+ years COUNCIL of MORTGAGELENDERS

  12. Market implications: over-reliance 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 MORTGAGELENDERS

  13. 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 MORTGAGELENDERS

  14. 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 MORTGAGELENDERS

  15. Do you think something should be done to make it easier for young people to buy their first home? YouGov Survey Results Sample Size: 2414 Fieldwork: 14-16 November 2006 COUNCIL of MORTGAGELENDERS

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