Demand for mortgages has hit a post-crash high as official figures revealed that the number of homes on which construction began fell by 14 per cent to 33,280 in the second quarter.
The figure, which is 6 per cent lower than the same quarter last year, has dashed hopes of an easing of the imbalance between supply and demand.
Housing starts in England are now 32 per cent below their peak in 2007, according to The Times.
There were 136,320 starts for the year to June. This was down 1 per cent on the year before and below the 240,000 homes that the industry believes is needed each year in order to start to address the housing crisis.
Campbell Robb, of the housing and homeless charity Shelter, said: “We’re not building anywhere near the number of homes needed each year, leaving millions of ordinary hard-working people priced out.
“Despite claims by the government that progress is being made to solve our chronic housing shortage, the number of new homes started has actually decreased.”
Mr Robb said that the autumn spending review was George Osborne’s last chance to show that he was serious about addressing the crisis by investing in affordable homes.
New evidence has emerged that demand for homes has continued to grow amid record low mortgage rates and rising wages. Gross mortgage lending reached £22 billion in July. This was 9 per cent higher than June, 14 per cent higher than July last year and the highest figure since July 2008.
The Council of Mortgage Lenders, which published the data, forecasted that lending would rise to £209 billion this year, up 3 per cent on 2014. That would be the highest annual mortgage lending figure for seven years.
Mohammad Jamei, an economist at the council, said: “We expect lending activity in the rest of the year to be underpinned by improving economic fundamentals, but kept in check as any upward pressure on house prices further stretches affordability for some buyers.”
The imbalance between supply and demand appeared to be pushing prices higher again.
Knight Frank and Markit’s latest house price sentiment index rose this month for the first time in six years. Households in all UK regions perceived that house prices rose in August.
Households in the southeast perceived the highest rate of house price growth. The increase confounded the usual seasonal summer lull and comes despite heightened expectations of an interest rate rise by the Bank of England next year.
Gráinne Gilmore, head of UK residential research at Knight Frank, said: “The strength of the UK economy, rising wages and an undersupply of housing stock on the market are combining to underpin UK house prices. This has resulted in the first rise in the index in August, usually a quieter summer period, seen since 2009.”
Hometrack, the residential analyst, found house prices had risen by 4.3 per cent in three months to July in the country’s main cities, the highest quarterly growth for 11 years. Overall city level house price inflation remains on track for 10 per cent growth in 2015, it said.
