CML: Home ownership continues to fall

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by Kay Murchie

According to the Council of Mortgage Lenders (CML), home ownership in the UK continues to fall - as a result of affordability pressures and a shortage of new homes.

During the 10-year period, 1999 and 2009, the number of new homes built each year has been between 130,000 to 170,000.

However, according to estimates from the National Housing and Planning Advice Unit (NHPAU), an average of a quarter of a million new homes will be required each year to meet housing needs.

The CML said the problem has been exacerbated by the extra disruption to supply as a result of the credit crunch.

Meanwhile, the latest edition of the English Housing Survey - published by the Department for Communities and Local Government (DCLG) - revealed the number of owner-occupied homes has dipped from its peak of 14,791,000 in 2005, to 14,621,000 in 2008-09.

This has been reflected in the number of people renting their homes privately which has grown significant to just over three million in 2008-09, from two million in 2001.

The CML comments: “For the foreseeable future, the picture of continuing constraint in the flow of housing supply, and indeed housing finance supply, looks difficult to avoid.

“The effect of this is likely to be that first-time buyers will continue to face significant deposit challenges to enter the market, and that the trend of falling home-ownership that had already begun before the credit crunch will continue,” said the CML.

In the autumn of 2007, the credit crunch brought with it a severe tightening of lending criteria and, as a result, first-time buyers have been unable to secure a mortgage unless they have a substantial deposit of at least 25%.

The CML highlights that today’s first-time buyer requires a deposit of around £34,000 - more than their total gross annual household income.

Prior to the credit crunch, first-time buyers could escape paying a deposit with the availability of 100% mortgages.

The credit crunch brought with it significant changes in the ability of first-time buyers entering the market, concludes the CML.