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Explaining the Growth of Home Ownership in the UK Why has home ownership become so popular in the United Kingdom? • Rising living standards – As incomes rises, so demand for housing increases because people can afford to enter the market. The demand for housing has positive income elasticity although this varies according to the type of property. • Increased supply of mortgage finance – the market for mortgage loans in Britain has become fiercely competitive leading to an expansion of the supply of mortgages. Home-buyers can choose fixed-interest rate mortgages which offer a fixed rate of interest over a number of years, and which make it easier to plan mortgage repayments when assessing family/personal finances. • Lower mortgage interest rates – mortgage rates charged to home-buyers have fallen to historically low levels. Even when house prices are rising, lower interest rates have the effect of reducing the costs of servicing (paying) the debt on a mortgage and this encourages more potential home-buyers into the market. • Subsidies and tax breaks for mortgage-payers – over many years the government has offered subsidies for people seeking to buy a home. Since 1979 over 1.6 million council houses have moved from the local authority sector into owner-occupied status. However, most of these housing subsidies have now been phased out. • The small size of the private rented sector – in many areas of Britain there remains a shortage of rented properties at an affordable price and this has made renting a property appear a poor substitute to buying one. • The decline in the supply of social (council) housing • The desire to accumulate wealth – the culture of owner-occupation has many roots, but one of them undoubtedly is an expectation that income from owning property will provide people with a means to enjoy a better retirement. |