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House price inflation and rising mortgage rates will make housing so unaffordable that half of all under-40s will be tenants within the next ten years, according to a report published this morning by PricewaterhouseCoopers.

It predicts that while house price growth will remain below the double-digit percentage surges witnessed in recent years, steady growth of around 5% a year will continue to outpace 3 to 4 per cent increases in wages. Combined with a likely upwards move in mortgage rates as a result of gradual interest rate rises, this will swell the ranks of renters from around a fifth to a quarter of all households by 2025, including "over half" of those aged between 20 and 39.

Quoted in the Daily Telegraph, PwC chief economist Richard Snook said: "Driven by a decade of soaring house prices pre-crisis and lower loan-to-value ratios post-crisis, the deposits needed by first-time buyers have risen significantly.

"As a result, a generation of private renters have emerged and this will increasingly be the norm for the 20-39 age group."

According to a Nationwide index, house prices rose by an annualised 3.3 per cent last month, ahead of the 3.2 per cent boost to wages recorded during the previous month which was the strongest rise in five years. City AM says that think tank the Centre for Economics and Business Research hiked its 2015 house price growth forecast to 4.7 per cent yesterday amid concerns over supply.

The Telegraph notes that 1.8 million more households will be renting by 2025, taking the total to 7.2 million, as house prices surge from around £279,000 now to £360,000. Around a similar number will be buying a house with a mortgage, a drop of around 800,000. Overall home ownership will have fallen from a peak of 71 per cent in the mid-2000s to 60 per cent.
Some will benefit from the changing dynamic, however. Those already in the market will continue to "cash in" and the number of older households owning their home outright will increase from a little more than 30 to 34 per cent.

House prices 2015: surprise drop in top London boroughs 

20 July

House prices in the most expensive London boroughs have unexpectedly dipped, according to figures published today, but prices across the country continue to edge up.

The latest index published by property listing website Rightmove showed a reversal of recent trends, according to The Guardian, which cited rising house prices in North-East England but a softening in London, where price inflation has been rampant in recent years.

During July, prices in the most expensive London borough, Kensington and Chelsea, fell 7.2 per cent. City AM notes significant falls in other high-value areas of the capital, such as Camden and Richmond-Upon-Thames, with the five worst-performing boroughs in the report all boasting average prices of above £618,000.

Cheaper boroughs meanwhile closed the gap a little, with house prices in Greenwich and Lambeth up by 7.9 per cent and 7.8 per cent respectively for the month.

Further afield, in the north-east of England prices rose by 2.1 per cent, and the average rise for the country as a whole was 0.1 per cent, leading to a record for the index of £294,542. Other indices record a substantially different average price, but the trend is uniformly positive.

Bloomberg notes that today's report recorded a rise of 1.1 per cent for London homes with two bedrooms or fewer, the most in-demand for first-time buyers, while the broader average was up just 0.2 per cent. The Guardian identifies similar concerns in other cities, where private landlords are buying up smaller housing stock.

Last week the Royal Institute of Chartered Surveyors said the number of homes listed for sale was at its lowest level since records began in 1978.

House prices: record cash injected into homes

7 July

Low savings rates, rising house prices and a mortgage price war are persuading British homeowners to pour money into bricks and mortar, reports The Times.

The Bank of England says net housing equity injection – the rate at which people pay off their mortgages or add value to property with home improvement works – has reached a record £13bn in the first quarter of 2015.

That's an increase of £400m from the final three months of last year, and the 28th quarter in a row of net injection of equity into houses. A total of £31bn has been injected since 2008.

The present trend contrasts sharply with a period of continuous housing equity withdrawal between 2000 and the first quarter of 2008. During that time, borrowers often re-mortgaged their homes to pay for holidays, clear other debts and top up pensions.

During the financial crisis many people attempted to clear as much debt as they could, but The Guardian reports that economists have been surprised to see the trend continuing as the economy recovers.

One explanation is that low returns on deposits are encouraging people to pay money into their mortgages instead of savings accounts in order to reduce their repayments.

Another is that record low mortgage rates are encouraging borrowers to seek out new deals, which in turn provides an opportunity to reassess their finances and cut their debts. Low interest payments also leave more cash available for mortgage overpayments.

An increasingly bitter price war between lenders and building societies reached a peak last month, as Chelsea Building Society became the first to offer home loans below the 1 per cent mark.

Chief UK and European economist at IHS Global Insight Howard Archer says the trend is to be welcomed.

"There is a compelling case for many people to be looking to take advantage of very low mortgage interest rates to reduce their outstanding mortgage balances to improve their personal balance sheets – if they can afford to do so," he said.

But the Bank of England says it would be misleading to assume British households are set on the path to financial responsibility. Overall levels of savings, released last week, continue to show a worrying decline, it said.

House prices 2015: growth slows, but still outpaces wages

2 July

House prices may be becoming a little "saner", in the words of the Financial Times's FastFT blog, but they're still rising faster than average earnings – which means its getting harder to gain a foothold on the housing ladder.

One of the main house price indicators published by Nationwide showed what City AM describes as a "surprise" dip in June, with prices falling by 0.2 per cent relative to May. Annual growth has fallen to a two-year low of 3.3 per cent.

But this remains significantly ahead of the annual increase in the average wage, which reached 2.7 per cent over the three months to April. And the average UK house is still worth more than £195,000, a high watermark breached for the first time in May.

Reuters notes prices in the vast majority of UK regions are continuing to rise, with Northern Ireland seeing the fastest growth over the past year of 8 per cent, followed by London at more than 7 per cent. Prices in Scotland fell by 1 per cent over the past 12 months.

The findings come in the wake of a new report from the Bank of England, which flags house price inflation as an ongoing concern, and singles out a boom in mortgage lending to private landlords as a threat to financial stability.

"Looser lending standards in the buy-to-let sector could contribute to general house price increases and a broader increase in household indebtedness. And in a downswing, investors selling buy-to-let properties into an illiquid market could amplify falls in house prices, potentially raising losses… for all mortgages," it states.

According to figures published in The Times, unregulated buy-to-let lending has enjoyed huge growth since 2000, now accounting for around 15 per cent of all housing stock compared to just 1 per cent 15 years' ago. Around £150bn has been extended to landlords and nearly one in five mortgages today is to the sector.

www.theweek.co.uk