Having warned that the pandemic would worsen pre-existing inequalities and exacerbate growing generational divisions, the think tank said only those who already had high savings levels before the onset of the Covid recession would benefit.
House prices staged a ‘mini-boom’ last month after Chancellor Rishi Sunak launched a stamp duty holiday to restart the housing market after the first drop in home values since 2012. However, The Office for Budget Responsibility (OBR), the government economic forecaster said prices could drop 21% by the third quarter of 2021 before a long, slow rise in property values sets in. installed.
Faced with the prospect of collapsing house prices and with fewer teams available to process mortgage applications while staff are working from home, banks have started to pull out of high-value mortgages. Since the foreclosure, the number of mortgages in the market has fallen by nearly half, with several major lenders now refusing to offer mortgages without a much larger deposit.
High-value mortgages – over 90% of a property’s value – are typically taken out by first-time buyers, as they tend to have smaller deposits and move up the property ladder at a low price. when house prices have risen dramatically. faster than average incomes.
The Resolution Foundation said that in the 1990s, a typical young couple setting aside 5% of their income each year could save enough for a deposit in just four years. By 2019, that figure had risen to 21.
Basing his estimates on the OBR’s most pessimistic forecasts for income growth and house prices over the next four years, he said the time needed to save for a deposit would only be reduced by d ‘one year and that even this small gain would not persist. .
The think tank said the government’s stamp duty holiday – which is slated to last until March next year – also took away the slim edge aspiring homeowners had in the market. Indeed, a typical first time buyer outside of London was already paying no stamp duty.
He also warned that private tenants were suffering a financial blow during the pandemic. Although some households have been successful in saving money, the think tank said only 13% of private renters aged 24-35 had savings of £ 10,000 and a quarter were forced to dig into their homes. savings as the economic fallout from the pandemic intensified.
Lindsay Judge, senior research and policy analyst at the Resolution Foundation, said: “The coronavirus crisis has had a big impact on the education, career prospects and incomes of young people – and sadly, there is no liner for this group when it comes to house prices.