The haves and have-nots – never have we been so divided

A whole generation is missing out as younger Britain is becoming a nation of renters, says Chiara Cavaglieri

The UK's property market has never been so deeply divided. The “haves” are snapping up cheap mortgages, or whittling down their existing home loans, while the “have nots” are sitting on the sidelines struggling against rents rising faster than wages and deposits at eye-watering levels.

House price growth is stable for the most part and many existing homeowners are overpaying their mortgages while the Bank of England base rate remains at the historically low level of 0.5 per cent. For prospective buyers who have built up big deposits, or had help from the “Bank of Mum and Dad”, mortgages have never been so attractive and lenders are now open for business.

In the 12 months to April 2013, average UK house prices increased by 2.6 per cent, according to the Office for National Statistics (ONS), with growth of 2.8 per cent in England and 6.2 per cent in Wales offset by declines of 1.2 per cent in Scotland and 0.8 per cent in Northern Ireland. London continues to mark its own path with a 6 per cent jump in prices, helped along the way by an influx of foreign money.

Experts say that an ongoing lack of supply is keeping housing overvalued, and while this may keep some voters happy, rising prices are bad news for first-time buyers (FTBs) already battling to save enough money for a deposit. Original government schemes have helped only a handful of people (fewer than 2,000 have bought through NewBuy) and home ownership is slipping out of reach for many. Let us not forget that in the last decade, home ownership fell for the first time since 1918 as soaring property prices and stagnant wages forced more people into rented accommodation.

So Britain is becoming a nation of renters – but many experts believe that if rental prices and the cost of living spiral any further we could have a housing crisis on our hands.

Private rents in England have risen by 8.4 per cent after inflation in England since 2005, according to the latest ONS report, driven by an 11 per cent increase in London. In the last year, they have risen by 1.5 per cent in Wales, 1.3 per cent in England and 1 per cent in Scotland. With inflation – currently 2.7 per cent – and non-existent wage rises, many Britons are finding it tough. This issue is particularly prevalent in London, which commentators say is in danger of becoming entirely unaffordable for all but the wealthiest.

New figures from Shelter further lift the lid on these increasing barriers to home ownership. Calculations for the housing charity's “A Home of Their Own” campaign make for sobering reading – a couple on an average income starting a family in their twenties would have to save up for 12 years before they could afford their first home. Couples with kids living in the capital would fare even worse, facing 21 years of saving, while single people would be forced to save for more than 14 years to afford a deposit. Aside from the fortunate few on above-average wages, or coming into large sums of money from relatives, people are looking at over a decade of unstable renting or even having to move back in with their parents.

Not every existing homeowner is sitting pretty of course – the Bank of England has warned that homeowners face a debt timebomb if they failed to take advantage of record low interest rates, predicting that nearly one in 10 mortgage borrowers would have to work longer hours, or cut back on essentials if rates were to rise by just one percentage point.

Also, outside of central London and other perceived safe havens, equity is still an issue for some mortgage-dependent homeowners.

However, the property market is on firmer ground and the mortgage market is powering ahead. The number of approved mortgages is up by nearly a quarter in the 12 months to May and the total value for house purchases has risen to £5.5bn, according to new figures from the British Bankers Association. Remortgage activity has also seen a boost, up by 17 per cent on the year, accounting for 20,675 approvals worth £3bn.

The Government's Funding for Lending Scheme has made a big difference, sparking a host of cheaper mortgage deals and encouraging buyers back to the market.

“Fixed rates are at record lows, for example Chelsea BS offers a two-year fix at 1.64 per cent to 65 per cent LTV (loan to value) with a £1,675 fee, and Yorkshire BS offers a five-year fix at 2.44 per cent to 65 per cent LTV with a £1,475 fee,” says David Hollingworth of mortgage broker London & Country.

There has also been more activity at the higher LTV end of the market, which is a huge help to FTBs. However, they are still very thin on the ground and many would-be buyers simply cannot cover the 10 per cent deposits that most lenders require.

The Government's flagship Help to Buy scheme may initially make a difference – it has so far exceeded forecasts with 4,000 people reserving a new home in the first two months. The shared equity part of the scheme means that borrowers can buy a new property with a 5 per cent deposit using government loans (interest-free for five years) to top this up by 20 per cent for access to cheaper mortgages. The second leg of the scheme comes into play next year, providing cheaper loans for people with 5 per cent deposits on any property (new and old) worth up to £600,000, with no restrictions on how much buyers earn or whether they already own a property.

However, economists have been lining up to criticise the scheme warning that it will create a mini housing bubble by inflating prices without boosting supply, leaving those homeowners stuck with negative equity if prices subsequently fall.

“There's no evidence that this scheme will do anything to help low and middle-income families get on the housing ladder, and could end up subsiding second homes and those who can already afford to buy,” says Kay Boycott of Shelter. “If the Government really wants to help ordinary people to buy a home of their own it should scrap this scheme in favour of a bolder plan to build homes families on average incomes can actually afford.”

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

Arts and Entertainment
Billie Piper as Brona in Penny Dreadful
tvReview: It’s business as usual in Victorian London. Let’s hope that changes as we get further into the new series spoiler alert
Life and Style
A nurse tends to a recovering patient on a general ward at The Queen Elizabeth Hospital in Birmingham
Arts and Entertainment
No Offence
tvReview: No Offence has characters who are larger than life and yet somehow completely true to life at the same time spoiler alert
Chuck Norris pictured in 1996
Arts and Entertainment
Sarah Lucas, I SCREAM DADDIO, Installation View, British Pavilion 2015
artWhy Sarah Lucas is the perfect choice to represent British art at the Venice Biennale
A voter placing a ballot paper in the box at a polling station
Arts and Entertainment
The Queen (Kristin Scott Thomas) in The Audience
theatreReview: Stephen Daldry's direction is crisp in perfectly-timed revival
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

    £20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

    Ashdown Group: Marketing Executive - 6 month FTC - Central London

    £25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

    Ashdown Group: Junior Project Manager (website, web application) - Agile

    £215 per day: Ashdown Group: Junior Project Manager (website, web application ...

    Guru Careers: Software Engineer / Software Developer

    £40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

    Day In a Page

    General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

    Miliband's unlikely journey from hapless geek to heart-throb

    He was meant to be Labour's biggest handicap - but has become almost an asset
    General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

    On the margins

    From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
    Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

    'This is the battle of young Egypt for the future of our country'

    Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
    Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

    Why patients must rely less on doctors

    Improving our own health is the 'blockbuster drug of the century'
    Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

    Flesh in Venice

    Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
    11 best anti-ageing day creams

    11 best anti-ageing day creams

    Slow down the ageing process with one of these high-performance, hardworking anti-agers
    Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

    Juventus vs Real Madrid

    Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
    Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

    Ashes series looks a lost cause for England...

    Whoever takes over as ECB director of cricket, says Stephen Brenkley
    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power