"Expensive forms of debt may reflect both stricter affordability criteria from lenders on mortgage borrowing and a decade of little to no real wage growth."
In its Quarterly Economic Bulletin, the Association says the housing and mortgage markets remain governed by the significant imbalance between supply and demand, further underpinned by low interest rates making purchase and remortgage more affordable.
It also believes the UK’s economic fundamentals remain strong with inflation historically low, growth still in positive territory and a recovered pound now impacted by electoral uncertainty.
However it admits that consumer indebtedness is a growing concern and that house price growth is likely to continue to stagnate this year and early next year.
One risk, the AMI says, is that increasing reliance on short-term, expensive forms of debt "may reflect both stricter affordability criteria from lenders on mortgage borrowing and a decade of little to no real wage growth".
It added: "This is particularly acute for the younger and still working generations whose incomes have not been protected by the Government’s triple lock on the state pension. The endemic lack of real income growth for the younger generation is becoming problematic, and if it persists, will likely pull house prices down over the medium to longer term."
The AMI says the fall in property prices is "not likely to be severe and could serve to boost buyer interest", but does underline how important the Help to Buy scheme is in supporting lenders’ confidence at the higher end of the LTV scale.
Labour has said it will extend the Help to Buy scheme to 2027 if elected, and the AMI says it "seems sensible to consider an extension under a Conservative Government as well".
