The L Word

In those busy days before Christmas a story snuck into the news which made me do a double-take. It didn’t seem to get that much attention, drowned out in the hubbub of the countdown to the Big Day, but I think it's a huge story.

It was reported that the proportion of 25 year olds who own their own homes has more than halved in the last 20 years.  HALVED!  Just one fifth 25 year olds are now home owners, compared with 46% two decades ago.  Most are now in Generation Rent or Generation-live at-home-with-your-parents.

As a 25 year old (oh, to be that age again…!) I was lucky enough to be a home owner. Well, to be more precise, I owned a little bit of the home and the Woolwich was doing all the heavy lifting.  Of course, it wasn’t easy.  We were just coming out of a period when interest rates were at 15% and the budget was tight.  Very tight actually.  But there was no doubt in our minds that we were doing the right thing by owning our own home.  The value of housing seemed to always be rising and you could use the escalator of the housing market to accumulate some wealth.  It was how you got on. You didn’t question it.

But roll the clock on a generation or so, and it's all very different.  Property, particularly in the South is, of course, very expensive, fuelled by a long period of low interest rates and a few decades where we’ve failed to build enough houses.  Add to that the rise of the private rented sector and the recycling of the wealth of a previous generation into buying properties that might otherwise be bought by first time buyers and you’ve created a potent cocktail of reasons why first time buyers are frozen out of the market.  And with prices as high as they are, it’s far from certain that property prices are going to keep rising in the way that they have done in the past.  It may be more of a “property plateau” rather than the “property ladder” we often talk about.

There.  I’ve gone and done it!  I’ve used the “L” word.  I know that many people in the world of regulation wince when the words “property ladder” come up.  It suggests an inexorable rise in prices which in turn suggests a lender that won’t judge a borrower’s ability to afford the mortgage properly relying for its own; and the borrower’s protection, on the unfettered upward drift of the property market.  In my case, far from it.  I’ve been through enough economic cycles to know that prices do go down as well as up.  And I’m not at all blasé about the possibility that prices might not rise in the way they have in the past for a generation.

But whilst I am of course delighted that my own property has risen in value substantially in the last few years, I can’t help thinking that a world of older “haves” and younger have-nots is not a healthy world.  I want a world in which young people can look forward to some of the simple pleasures that I have enjoyed, such as doing home improvements, planning a garden and seeing it mature and enjoying a sense of permanence and stability that you get from being a home owner.  Even if owning your own home turns out not to be the financial bonanza it has been for the last 40 years, there’s a lot to be said for it.

Finding safe routes for younger people to get onto the property ladder isn’t always easy for a lender.  We could have made our lives easier by not launching student mortgages, parent-assisted mortgages, shared ownership mortgages and rent-a-room mortgages.  But every so often we get a letter from somebody whose dreams we have been able to make true, and every time I see one of those, it makes me proud to think that this little lender has been able to do something that the big guys couldn’t or wouldn’t do.

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