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Debt To The Future - Should Pensions Fund First Time Buyers?

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SIPP  Confederation of British Industry  pension plan  housing demand  housing supplyunfreezing the housing market 

Debt To The Future - Should Pensions Fund First Time Buyers?

By - Thursday 24 November 2011

The Confederation of British Industry has come out and said that first time buyers should be given access to their pension pots to fund the deposit on a mortgage. A new study published last week titled Unfreezing the Housing Market, states that UK housing sales have plummeted despite the fact that there are 5 million people "languishing on waiting lists".

John Cridland, CBI Director-General, said the fall in sales has accounted for a third of the 6pc drop in UK GDP during the recession. Boosting housing sales could be "a major game-changer for growth", he added.

Maybe getting first time buyers buying again would save the housing market, maybe. And maybe allowing them to access their pension would propel them to buy, however, while it is a good sound bite it is not a very practical policy.

Yes, the deposit requirements are the main factor stopping many first time buyers from buying, but it is not the only thing preventing them from buying.

In London prices fell in 2008 before rising again constantly since mid-2009. Thus, the price drop was nowhere near what people predicted, nowhere near what we have seen in previous crashes, and nowhere near far enough to "correct" the affordability gap in the capital, between wages and house prices. Many would-be first time buyers simply can't afford to buy, and not just in London, though the problem is on a much smaller scale elsewhere.

Many would-be first time buyers have no job security. Job security is seen as something our parents might have had for many people. While people are in fear for their jobs, they are not going to take out a mortgage and buy a house, regardless of their financial situation.

And that is before we even think about the long term practicalities of raiding our pension fund now. We are all living longer and there are currently more people drawing state pensions than there are working to pay for it. For the first time everyone in the UK who wants to have a financially secure future is investing in some sort of pension scheme.

But, with the stock markets as volatile as they are, these investments aren't performing as well as they could be. Thus, many would-be first time buyers, that is, those left after the above exclusions, won't have enough in their funds in the first place. Those that do could severely regret taking a lump sum now.

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