A Million Families Cannot Afford To Buy, Just Privately Rent.
A record number of middle class families are finding themselves caught in a rental trap due to a severe shortage of new home seeing built and a resurgence in the property market. Also with savings at rock bottom, soaring rents and tough new mortgage rules, many are finding it near impossible to get onto the property ladder.
These middle class families are now becoming known as the ‘squeezed middle’ as they are suffering from not only rising living costs but also from negligible annual pay rises. In fact today nearly one in five families rent in the UK. 1.2million households are privately renting today, up 1million since 2011 according to the housing charity Shelter. This is compared to homeownership standing at 64%, which is at its lowest for over thirty years. In 2001 home ownership stood at 70% so the drop is quite substantial.
Renting is now accelerating in the housing market according to the English Housing Survey. It found that 874,000 families were either renting a house or flat in the private sector in 2012, up a third since 2011. Compare this to the 386,000 that were renting in 2006 and 2007 and it is clear that private renting is accelerating at an alarming rate. Experts are now predicting that in the next year this figure could reach 1million. They also feel that unless couples have help from parents or grandparents to raise a deposit then more will find themselves unable to get onto the property ladder.
House prices are believed to be the root cause of the rise in private rentals. In some areas prices are now back to what they were pre-2007 and just over the summer prices have risen by £500 a month. Many people rely on parents to help, with the average handout being £17,000, this equates to a 10% deposit for an average property. Research suggests that a third of all house purchases would never have taken place if it had not been for help from the buyer’s family.
Today to get a mortgage at 4% you would need a deposit of 10%. A 5% deposit requires savings of £8,500. But wages are not going up at the same rate as property prices, with some people suffering from pay freezes since the financial crisis. In 2001 the average house price was six times the national wage, today it is nine times, so without a huge deposit the chances of getting your own home are slim.
On the other end of the scale many homeowners have found themselves back renting because they could not afford their monthly mortgage payments. As a result buy-to-let investors are swooping in to take advantage of the low interest rates that can be fixed for two years at 1.74%. Lenders find these investors attractive because they have a portfolio of properties and so have greater financial power. Therefore this in turn becomes a nightmare for renters because there are fewer homes on the market and a greater demand for houses to rent.