First-time buyers now need to postpone their purchases in order to save for a larger deposit and in the future may increasingly look at alternative schemes for financing house purchases with more outside equity. He predicts that this need for equity will lower the rate of owner-occupation. In the short-term this creates transitional problems – particularly for house builders – and recent government policies have been designed to counter them. But in the longer-term a lower rate of owner-occupation, and a bigger rental sector, need not be a negative outcome – it could help to offset tax distortions that work against renting and stabilise the housing and mortgage markets, and ultimately the wider economy. Monetary policy might need to be re-calibrated but would not be less effective.
Press release