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BoE man says rental sector is key to Britain’s changed housing market

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BoE man says rental sector is key to Britain’s changed housing market

A member of the Bank of England’s MPC has suggested that the housing market will never go back to what it was.

David Miles said home ownership will fall sharply, taking a back seat to renting, as people are forced to wait until they are aged 44 to get on the housing ladder, with banks refusing to offer large mortgages.

He said the credit crunch has created a new world where there will be a “lower rate of owner occupation and a bigger rental sector”.

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Miles said he did not “think we should regret” the fundamental change in the housing market caused by the credit crisis, and said that renting could be of benefit to the overall UK economy.

Miles, who previously led an official inquiry into the mortgage market, cautioned against a return to banks offering mortgages to borrowers with small deposits.

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He said: “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 and 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.”

He said that the economy might become more stable if Britons were less dependent on changes in house prices and mortgage rates.

He also highlighted the benefits to the economy of renting, rather than buying homes.

He said tenants can move more easily for new jobs, thus lowering the risks of structural unemployment.

Miles forecast: “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.”

A new Bank of England survey has found that City experts believe the risks facing the economy are as great as on the eve of the credit crisis in 2008.

Source:http://www.choices.co.uk/blog/boe-man-says-rental-sector-is-key-to-britain-apos-s-changed-housing-market-9077

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