In his 'The Default Line-The Inside Story of People, Banks and Entire Nations on the Edge', Channel 4's ecomonics editor, comments on the UK housing market.
He's how the insane British economy works.
We bailed out the banks, and slashed interest rates to 0.5%, meaning savers can't get a return. So retirees pour their capital into the housing market, and the demand is met by banks diverting mortgage funding to by-to-let. Young people can't afford to compete with investors with larger deposits, mortgage firepower, and tax breaks (partly paid for by first time buyers themselves). Because young people can't afford to buy houses there is an increase in rental demand which in trn pushes up rents sky high. This attracts even more mortgage funding and retiree capital from no-return savings, exacerbating the probelm. Because it is so expensive to rent, the young have no chance of saving a deposit to compete with the buy-to-letter-so completing a self perpetuating vicious circle.
And there are even more scary bits in this book. Not for the faint hearted.