Enlarge imageLONDON (Reuters) - Home buyers could face house prices 10 times their annual earnings by 2026, according to a new housing advisory body.
As house prices continue their steep rises, as many as one third of non home owners now believe they will never get on the ladder, the National Housing and Planning Advice Unit (NHPAU) said.
"Housing affordability has reached a critical point," said unit Chairman Stephen Nickell, a former member of the Bank of England’s rate-setting Monetary Policy Committee (MPC).
"First time buyers have seen a big rise in the deposit needed to buy a home and the amount of their income spent on mortgages."
"Demand for housing is growing," he added, "and unless action is taken, pressure on the market will only get worse."
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The NHPAU is a new non-departmental body, sponsored by the Department for Communities and Local Government, which will provide expert advice to the government on addressing long term market affordability and housing supply.
The Bank of England was announcing its latest decision on interest rates on Thursday, and although most economists expect the central bank to hold rates this month after four hikes since August, many forecast at least one more increase this year.
Markets have even priced in a rise in borrowing costs to 6 percent by the first quarter of next year from the current 5.5 percent as the BoE seeks to curb above-target inflation.
Policymakers say they would like to see the housing market moderate but so far rising rates have had little significant impact on price growth, with some measures of inflation showing house prices rising more than an annual 10 percent.
Most researchers blame rising prices on dwindling supply in areas of high demand like London and the southeast.
