Between 1995 and 2007 the UK population increased by 5%, the housing stock increased by 10% and house prices increased by 350%, meanwhile mortgage lending by banks increased by 630%. Which of these figures is more likely to have led to a 350% rise in house prices: a 5% rise in population growth which is matched by an increase in supply of housing; or an unprecedented increase in mortgage lending from the banks?

There is further support from Australia and the US where empirical studies have been carried out which show that in US and Australian housing markets house price rises definitely are linked to increased mortgage lending. If it’s true in Australia and America why shouldn’t it be true here?

Australian Economist, Steve Keen, who is responsible for the studies says in an article entitled ‘House Prices and the Credit Impulse’: “Population dynamics – even immigration dynamics – have nothing to do with house prices. What determines house prices is not the number of babies being born, or immigrants – illegal or otherwise – arriving, but the number of people who have taken out a mortgage, and the dollar value of these mortgages. For changes in house prices, what matters is the acceleration of mortgage debt.”

In one sense whether house price rises are driven by population or lending is immaterial and that’s in the effect they have on buyers, especially first time buyers. According to Moneywise, nowadays the average UK home costs six times the average annual salary. And so, according to a study by housing charity, Shelter, access to home ownership is increasingly becoming a matter of inheritance only.

Even more sobering, according to the same report, a similar increase in the cost of private renting means the average time taken to save enough money for a deposit on a house is now 45 years compared to eight years in the past. All of which contributes to the average age of first time mortgage buyers rising by 10 years every decade.