This week Boris Johnson boasted that his government would “turn generation rent into generation buy” via a return to 95% mortgages for first-time buyers. In other words, easier credit to help more people buy houses.
To say we have been here before would be an understatement of epic proportions. Since the days of Margaret Thatcher, every UK government has sought to cut through the housing affordability problem with the easy and politically popular option of subsidising the demand for homeownership. Generally, this has taken the form of liberalising mortgage regulation or providing direct government subsidies for first-time buyers, most recently the various help-to-buy schemes. All have failed to bring down the price of homes.
More demand for homeownership leads to more more credit flowing into an inherently limited supply of homes. Most housing in the UK is provided at market rates by private landlords and private sector developers. These