High end estate agency Savills says the credit crunch – roughly 10 years old next month – is still having an impact on the housing market.
It says there are four key ways in which the market is influenced.
Firstly, equity trumps debt – the agency says a total of £312 billion was spent on house purchases in the year to the end of March 2017, some £30 billion less than in 2007.
Lending at 90 per cent loan to value now accounts for just 3.9 per cent of all new mortgages, down from 14.1 per cent in 2007, and only 1.2 per cent of all lending is interest only, down from 32.5 per cent 10 years ago.
Secondly, the Bank of Mum & Dad has become a major lender – this is because constraints on mortgage lending means the deposit hurdle is very much higher now than it was in 2007.
The average deposit raised by a first time buyer has more than doubled, up 109 per cent to £26,224 across the UK as a whole. In London, it has more than quadrupled – up 360 per cent to a remarkable £97,513.
Thirdly, there are fewer rungs on the ladder – a more constrained mortgage lending environment means that fewer home owners are able to trade up the ladder.
Savills says that in 2007 one in 15 existing home owners moved home, a figure that has fallen today to 1 in 27. Over the past 10 years there have been some 3.8m fewer such home moves by those needing a mortgage than in the previous decade.
Fourthly, there is a squeeze on buy to let – In the year to March 2016, buy to let lending was effectively back to where it was pre credit crunch, as landlords saw an opportunity in rising house prices and growing demand from those excluded from home ownership.
Savills says increases in stamp duty and restrictions on tax relief on interest payments, however, have curtailed investor appetite and BTL borrowing has halved.
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