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MORTGAGE INTRODUCER – THE BIGGER ISSUE

By Rob Jupp

Is generation Y set to struggle to get onto the housing ladder?

I think we are using the wrong tense here. They are already finding it difficult and I see nothing out there at the moment that is going to alleviate that condition. A combination of house price inflation, most particularly marked in the South East, allied to a rampant BTL market with landlords attracted to a market where rental income is growing exponentially, is not a helpful recipe for any young first time buyer.

There is and will continue to be a fundamental mismatch between house prices, incomes and the ability to build a meaningful sum for deposit. Government intervention in the shape of HTB has helped increase FTB numbers but deposits required are getting beyond many pockets. While property prices have rebounded quickly after the recession, incomes remain depressed. In twenty years time, it will be interesting to see how many of the Y generation actually moved away from the capital and the South East in order to be able to find more affordable property. However, in the meantime do people gaze longingly at the housing ladder or continue to pay increasing rents with little security of tenure?

When we look at the rental market, much as it has been a bonanza for BTL advisers, the simple fact is we are reaching a point where rental prices are already forcing many youngsters back to the family home with all the friction that entails. Of course, it might actually lead to a renaissance in the importance of the family unit, but that is a conversation for another day.

Generation Y is struggling with factors we never had to consider, including further education loans, which have already loaded the dice against many mortgage applicants. A still nervous employment market where incomes have not leapt ahead like house prices is also a factor, but probably the most telling factors today on young owner occupation are the unintended consequences of the MMR and its focus on affordability and the growing use of an LTI cap.

This is not a great state of affairs, but every generation has its challenges. It is just unfortunate that homeownership is unlikely to be the expected legacy of the current crop of FTB hopefuls, as it was for us.