Ministers' alarm as door slams on first-time buyers

Emergency talks on the crisis in the housing market were launched yesterday amid growing alarm among ministers that a generation could be priced out of buying their own home.

The collapse in mortgage lending following the credit crunch and the soaring cost of deposits have come together to thwart the hopes of many first-time buyers. Combined with stagnant house prices and the lack of house building, ministers fear that the parlous state of the property market could haunt the Government over the next few years.

The problems were underlined yesterday by figures from the Council of Mortgage Lenders (CML), which showed that many first-time buyers had to put aside more than a year's pay – before tax – to afford the downpayment on a home.

The average deposit jumped from £12,700 at the beginning of 2007 to £31,500 – well over the average annual wage – by the middle of last year. In 2010, 194,600 people made their first house purchase, less than half the number just four years earlier.

The CML also forecast that the total value of property transactions will be around £135bn this year, down from £360bn at its pre-credit crunch peak. Grant Shapps, the housing minister, who summoned the talks, said yesterday that the average age of the first-time buyer without family support had reached 37.

He said there were 1.4 million households who aspired to own a home, but were unable to do so because of high house prices and problems obtaining an affordable mortgage. Calling for a "rational" housing market, Mr Shapps said: "I don't want to see the current generation completely locked out of the market. It seems to me the pendulum has swung too far the other way now. Even if you're on a very good salary, you still can't get a mortgage."

But Michael Coogan, the CML's director-general, warned there was no "magic bullet" to fix the problems in the mortgage market. He said: "It is good to see ministers taking the initiative to discuss how we can look to improve market conditions for first-time buyers. But no one will be surprised to learn there is no simple quick fix for a market that has changed fundamentally since the credit crunch."

Paul Broadhead, head of mortgage policy at the Building Societies Association, said: "Any initiatives focused purely on first-time buyers, without a sufficient increase in house building, could push prices up for entry level properties, particularly if second-time movers have low or negative equity."

Housing has been identified as a key issue for the Government to address in the second half of the five-year parliament. Oliver Letwin, the Cabinet Office Minister and David Cameron's policy chief, and Danny Alexander, the Liberal Democrat Chief Secretary to the Treasury, are drawing up a list of areas, including housing, on which the two Coalition parties will draw up a joint policy.

The aim is to address policies not covered in the Coalition Agreement struck last May and to provide fresh momentum for the Coalition after its initial reforms on education, health and welfare have been pushed through.

One Cabinet minister said: "Housing is a critically important issue. It is moving up the agenda fast. It is clear that the housing market is not functioning properly and it is something we need to address."

Start your day with The Independent, sign up for daily news emails
News
newsAnother week, another dress controversy on the internet
Life and Style
Scientist have developed a test which predicts whether you'll live for another ten years
health
Life and Style
Marie had fake ID, in the name of Johanna Koch, after she evaded capture by the Nazis in wartime Berlin
historyOne woman's secret life as a Jew in wartime Berlin
News
news... and what your reaction to the creatures above says about you
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs General

Recruitment Genius: Telesales & Customer Service Executive - Call Centre Jobs

£7 - £9 per hour: Recruitment Genius: Are you outgoing? Do you want to work in...

Ashdown Group: Finance Manager - Covent Garden, central London - £45k - £55k

£45000 - £55000 per annum + 30 days holiday: Ashdown Group: Finance Manager - ...

Ashdown Group: Systems Administrator - Lancashire - £30,000

£28000 - £30000 per annum: Ashdown Group: 3rd Line Support Engineer / Network ...

Recruitment Genius: Graduate Web Developer

£26000 - £33000 per annum: Recruitment Genius: A Web Developer is required to ...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn