Housing affordability

As ever any 'crisis' will be region specific. For example, houses are still affordable in Derbyshire so prices will continue to grow. Indeed the latest Rightmove stats showed prices in the East Midlands growing at the fastest rate nationally. The bit that always seems to get neglected from any conversation on house prices is the alternative. Rental prices are utter insanity and continue to grow. There just isn't the available stock. Therein lies the crux of the problem. We don't have enough houses, we don't build enough houses and therefore house prices will keep on rising and stretch normal people even more. Until anyone solves that issue we are going to see the same story again and again.

Affordability? What affordability? There is no affordability in the housing market. Average property prices have massively outpaced wage growth since the late 1990s. The only thing making them 'affordable' are ultra-low interest rates, which are fast disappearing. In the meantime, we have chronic homelessness and working people resorting to food banks to feed themselves and their families. Yet, there is complete silence from politicians on the obvious correlation between high mortgage and rent costs and people's living standards. It's time for a radical change of policy and thinking around housing. More house building, and including property prices in the 2% CPI inflation target, would be a good start.

In terms of monthly repayments on capital and interest mortgages over 25 years, house price increases have meant a larger percentage of income goes on mortgage payments. However, this would not be the case if you looked at interest-only, or even extended the traditional term to say 30, 40, or even 50 years, in which case mortgage costs could be represented at near historical lows. The truth is that most people don’t stay in their first home and therefore don’t need the burden of a capital repayment mortgage. The easiest way to ease affordability is to reintroduce interest-only as a viable and available option, at least in the early years of homeownership.