Property nightmare for the young as rents rocket and mortgage lending hits record low

Published 18th Nov 2010

Mortgage lending plunged to the lowest level for a decade last month and rents have shot to record highs crippling a generation of young people, alarming figures revealed yesterday.

The findings highlights the nightmare facing millions of Britons, particularly the young, who need a place to live, but are faced with options which all cost a fortune.

Due to the mortgage famine, which is predicted to get even worse, landlords are seizing the chance to levy the highest rents ever charged in this country.

The Council of Mortgage Lenders said it estimates just 160,000 first-time buyers have managed to get onto the property ladder this year.

This is the smallest number since the property boom began as young people are crippled by the enormous cost of buying a home and the battle to get a mortgage.

As a result, the average rent has jumped to £691 per calendar month, a record level, according to LSL Property Services, the owner of the country's largest network of lettings agents.

Soaring numbers of people are being forced to rent, not buy, a trend which is likely to continue unless property prices fall sharply.

At this level, the average earner who earns a salary of £25,000 is seeing more than five months of their take-home pay eaten up by their rent.

This is before they have had to find a single penny to spend on all their other bills from food to eat to the cost of heating their home.

In London, rents are even more expensive with a typical landlords charging £974 per calendar month, another record and nearly £50 more expensive than last year.

The estate agency Marsh & Parsons said the expensive rents in the capital can be up to £20,000 per week, including features such as a swimming pool and underground parking.

The figures demonstrates how the mortgage crisis is forcing people to become 'unwilling renters.'

Unless they can get help from their parents, few can afford to get onto the property ladder with mortgage lenders insisting on deposits of at least 20 per cent for the cheapest deals.

In the South East, where the average asking price is nearly £300,000, this is equal to £60,000, an impossible amount of money to save for most people.

David Newnes, managing director of LSL Property Services, said: 'Constrained mortgage finance is choking off the number of first-timers able to get on the ladder.

'With rising demand outpacing the increase in supply, rents can only go one way.'

Last month, just £12.4billion was handed out in gross mortgages, the worst record for the month of October since 2000 [must keep], according to the Council of Mortgage Lenders.

It expects net lending - the amount of money handed out minus the money repaid by homeowners - will be just £9billion this year, a low level not seen for at least 12 years.

Matthew Wyles, chairman of the CML who is also a director of Nationwide, Britain's third-biggest mortgage lender, said the level of mortgage lending is 'too low'.

He warned that 'great crowds of borrowers' could be excluded from the market in the coming years if the Financial Services Authority presses ahead with controversial changes.

Mr Wyles said: 'The simply fact is that the effect of the financial crisis, and the regulatory response to it, has been to make it very difficult for any UK lenders other than the very largest to be able to carry on lending in any meaningful way.'

The crisis is being made worse by the fact that number of new homes being built is close to an all-time low.

Between July and September, the construction of just 25,870 homes was 'started' in England, which experts say is far below the level needed to keep up with demand.

The number of 'starts' has almost halved in just three years, compared to 49,460 between January and March 2007.

The only winners from the rental boom are landlords who can enjoy 'a lucrative long-term investment', according to LSL Property Services.

Over the past year, the average UK landlords made a total annual return of just over £15,500, which includes the rent as well as the increase in the value of the property.

Source: ' Daily Mail '

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