The proportion of Britons who own their own homes is likely to be permanently reduced as a result of the financial crisis, Bank of England policymaker David Miles said on Tuesday.
Addressing a property industry conference in York, northern England, Miles said banks were unlikely to issue many high loan-to-value mortgages even when the economy picks up due to weak prospects for house price growth.
I do not believe that the housing market and the mortgage market will get back to where we were in the years leading up to the crisis. I also do not think we should regret that, Miles told the Northern Housing Consortium.
In the text of a speech provided by the Bank, Miles did not directly address Monday's proposals from Prime Minister David Cameron to indemnify banks against the risk of issuing high loan-to-value mortgages.
But Miles did say that tax incentives favouring home ownership over renting had made the rate of home ownership in Britain inefficiently high, and that tighter mortgage lending policies would improve financial stability, and make monetary policy easier.
When leverage in the housing market is lower, it seems clear that changes in house prices that originate from other sources than a variation of (interest rates) might have less impact on the real economy, he said.
The economy would become more stable. That would make the task of setting monetary policy easier and would, I believe, be far more significant - and beneficial - than some limited reduction in the impact of a given change in interest rates on the wider economy, he added.
Miles did not address immediate economic or monetary policy in his speech. Minutes to the Bank's November policy meeting will be published at 0930 GMT on Wednesday.
(Reporting by Olesya Dmitracova, writing by David Milliken; Editing by John Stonestreet)