Britain ‘heading towards generation rent’ - report

MOST younger people believe that Britain will become a nation of renters within the next generation, a report has found.

Young people think it is more likely they will have to rent. Picture: Ian Rutherford

The majority of 20- to 45-year-olds are either unsure how government efforts to help first-time buyers can ease the struggle to get on the property ladder or do not think that they will help, Halifax found.

Some 52 per cent of more than 8,000 people interviewed thought that renting rather than buying will become the norm within the next generation, marking an increase from 46 per cent when the same question was asked in 2011.

Halifax’s report found that the biggest chunk (40 per cent) of people surveyed did not know whether UK government initiatives such as NewBuy and Help to Buy will help ease the struggle to buy property.

Three in ten (30 per cent) of 20- to 45-year-olds thought the schemes will work, but the same proportion said they would not.

Nearly three-quarters of younger people (71 per cent) thought the problems facing those struggling to buy their first home are in danger of causing a damaging split between those who can afford their own home and people who cannot.

Three-fifths of the non-homeowners surveyed feared that they may never be able to retire if they are forced to rent for the rest of their lives. One-fifth of those surveyed who were not on the property ladder said they had already given up hope.

The government launched a scheme called Funding for Lending last August to kick-start the housing market, which has resulted in a sharp rise in the number of mortgages on the market and a mortgage price war, with lenders slashing rates. Lenders have reported signs of increased first-time buyer activity this year, although the latest figures from the Council of Mortgage Lenders (CML) shows the number of loans advanced dropped back slightly in April.

Halifax’s Generation Rent report also pointed to figures from the CML, showing that first-time buyers still needed to find a deposit of nearly £27,000 typically in the first quarter of this year.

Halifax found that 31 per cent of 20- to 45-year-olds said they would only save for three years for a deposit before giving up.

According to financial information website Moneyfacts, the proportion of mortgages on the market for people with a deposit of 5 per cent to 10 per cent is static compared with a year ago and almost half of mortgages are aimed at people with a deposit of 25 per cent to 40 per cent.

Government initiatives such as NewBuy and Help to Buy have been specifically aimed at people with smaller deposits.

Part of Help to Buy, which begins in January 2014 and will run for three years, involves government guarantees to lenders to support £130 ­billion of low-deposit mortgages, to help homeowners and first-time buyers.

The higher demand in rental has caused rent rises, adding pressure to those trapped there.

Craig McKinlay, mortgages director at Halifax, said: “More needs to be done to redress the balance, both through making home ownership more accessible and offering more stability through the rental sector.”