The credit agency Standard & Poor’s has taken the radical line of accusing the Bank of England’s low interest-rate regime of helping keep house prices high - and in so doing making it harder for first time buyers to get on the ladder.
In a high-level report S&P says low interest rates and quantitative easing help existing home owners but have a contrary effect on the rest of the population.
"Younger low and middle-income households are the ones affected most. As buying a home becomes ever more expensive, they are increasingly forced to rent, spending a large share of their income on accommodation and unable to save to buy a home or otherwise accumulate wealth. It also contributes to an even higher income inequality when accounting for housing costs. In fact, while income inequality fell slightly immediately after the crisis and has remained broadly stable since then, inequality when accounting for housing costs is on the rise again" says S&P’s chief economist Jean-Michel Six.
In a reference to the low interest rate determined by the Bank, the report says “it is now also one of the drivers behind the widening wealth and income gap between younger and older generations and between those on the housing ladder and those not on it.”