David Miles, A member of the Bank of England’s MPC has suggested that the housing market will never go back to what it was and the private rental sector is key to Britain’s changed housing market.
Home ownership is beginning to take the back seat as more and more people choose to rent property. This is in part blamed on high deposits required for property purchases due to UK banks limiting their risk elements, refusing to offer larger mortgages and introducing much stricter lending criteria.
David Miles is of the opinion that the UK’s economy might stablise if Britons were less dependent on changes in house prices and mortgage rates.
Mr Miles said “The credit crunch has created a new world where there will be a lower rate of owner occupation and a bigger rental sector. I don’t think we should regret the fundamental change in the housing market caused by the credit crisis, and renting property could be of benefit to the overall UK economy.
Mr Miles had previously led an official inquiry into the UK mortgage market, and he also cautioned against a return to banks offering mortgages to borrowers with small deposits, saying “Housing markets and mortgage markets have been close to the centre of the economic and financial turmoil we have lived through over the past four years. I do not believe that the housing market or the mortgage market will get back to where we were in the years leading up to the crisis. I also do not think we should regret that.”
David Miles also highlighted the benefits to the economy of renting property, rather than buying homes and reckoned that tenants in rented property could move more easily for new jobs, thus lowering the risks of structural unemployment. “It will take time for first-time buyers to accumulate larger deposits, so they will typically buy later and the share of home ownership will be lower. But in the longer run, it is not at all clear that a lower rate of home ownership represents a big loss to society.”
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