Former policymaker says housing affordability "critical"
Action must be taken to improve affordability in the buoyant housing market, former Bank of England policymaker Stephen Nickell said ahead of an interest rate decision on Thursday.
Higher interest rates and living costs, coupled with sustained house price inflation have pushed the prospect of owning a home beyond the reach of many first-time buyers.
One-third of non home owners think they will never be able to buy a house and, by 2026, home buyers could face house prices ten times their annual earnings, according to the newly-formed independent National Housing and Planning Advice Unit.
"Housing affordability has reached a critical point," said Stephen Nickell, chairman of the NHPAU and former member of the Bank's rate-setting Monetary Policy Committee. "First time buyers have seen a big rise in the deposit needed to buy a home and the amount of their income spent on mortgages."
"Demand for housing is growing and unless action is taken, pressure on the market will only get worse."
The MPC will announce its latest decision on interest rates at midday, and, although most economists expect the central bank to hold rates this month after four hikes since August, many forecast at least one more increase this year.
Markets have even priced in a rise in borrowing costs to 6 percent by the first quarter of next year from the current 5.5 percent as the Bank seeks to curb above-target inflation.
Policymakers say they would like to see the housing market moderate but so far rising rates have had little significant impact on price growth, with some measures of inflation showing house prices rising more than an annual 10 percent.
Most researchers blame rising prices on dwindling supply in areas of high demand, such as London and the south east.
safestore.co.uk, 01.06.2007