FTB mortgage costs are now higher than they were at the peak of the last housing boom…

First-time buyers were devoting nearly 35% of their income to mortgage costs by the third quarter of 2007, compared with the previous high of nearly 34% in 1990¹. The sharp rise in house prices and mortgage costs over the last decade contrasts with the pattern of private rents, which have merely kept pace with earnings, resulting in substantially lower rents than mortgage costs (around 64% of the cost) on equivalent properties².

The UK Housing Review 2007/08, published by the Chartered Institute of Housing (CIH) and the Building Societies Association (BSA), attributes the rapid growth in the private rented sector in part to the relative competitiveness of private renting as opposed to owner-occupation, but also to the greater choice available to households seeking private rented housing.

Steve Wilcox, Professor of Housing Policy at the University of York, and author of the Review said: "Private renting has become far more competitive as an option for households compared to the cost of buying; the sector has grown by 21% in the last five years across the UK and is fulfilling a significant role in the housing market. With the rates of population and household growth outstripping current and planned new house building we are likely to see continuing growth of the private rented sector."

Building societies ‘helping’

CIH Head of Policy Merron Simpson stressed, however, that an increase in the quality of private rented housing needs to go hand in hand with the increase in volume. "We are looking forward to the proposed review of private rented housing which was announced by housing minister Yvette Cooper before Christmas," she said.

Adrian Coles, Director General of the Building Societies Association, commented that "with first-time buyers finding it increasingly difficult to get a foot on the housing ladder, the private rented sector is providing accommodation to increasing numbers of people.

“Through the provision of loans to landlords, building societies are helping to ensure the success of the private rental sector. However, building societies have not forgotten the first-time buyer, and the recent BSA report Stepping up to the Mark demonstrated the wide range of innovative products that societies have developed for this market."