The findings suggest that loan-to-income ratios are likely to decline by 9% for every 1% of growth in new homes available.
Author of Nottingham Trent’s report, Dr Koblyakova, from the School of Architecture, Design and the Built Environment, explained: “The government thinks that by increasing the supply of new homes, the overall cost of owning a property will come down.
“But this research shows us that the mortgage market behaves differently. When new housing comes on to the market, lenders relax their conditions and lend more money. And when consumers are more able to buy a property for a higher price, the price of property doesn’t come down.”
Affordable housing is graded as 3.0 or less by another industry survey last year, which showed homes in the UK demonstrated a ‘seriously unaffordable’ rating. The house price to income ratio nationally stood at 4.6 and 8.5 in Greater London last year.
Dr Koblyakova said the findings from the Nottingham Trent report were “significant”.
“The main issue that property values in the UK go up faster than wages,” he said.
“It’s important, therefore, that future affordability programmes focus not only on the supply of affordable housing, but also on the supply of housing finance.”
The study was based on a sample of more than 1,700 mortgage holders between 2010 and 2014, using sources including Bank of England Data Archive, Land Registry data and European Mortgage Federation publications.
Dr Koblyakova suggested that longer mortgage terms would make it easier for borrowers to maintain the mortgage repayments on their home.
“It’s not possible for the government to control house prices. But it is possible for politicians to motivate lenders to offer longer mortgage contracts to reduce the size of monthly mortgage payments.
“By increasing the duration of a mortgage to 30 years, for instance, it’s possible to make owning a property more affordable for those on average incomes,” he said.
