The Intermediary Mortgage Lenders Association (IMLA) has today released its 2022 Mortgage Market Manifesto, outlining the key areas it believes Government and the industry should focus on in order to ensure the UK’s housing market remains both buoyant and accessible. Government focus on balancing the need for affordable housing for first-time-buyers against the vital role played by the private rental sector will be essential in maintaining the sector’s promising trajectory throughout 2021, especially following the increased numbers of landlords buying BTL property during the 2021 stamp duty holiday.
The manifesto sets out a list of priorities for 2022, including addressing the imbalance of housing supply, reassessing the current affordability and stress testing criteria and incentivising the Green agenda.
Kate Davies, Executive Director of IMLA said:
“Despite – and in some cases as a result of – the continuing COVID-19 pandemic, 2021 remained a very busy year for the housing market. Amid this ongoing demand, there are still plenty of areas we need to focus on to support the market, and ensure it is accessible to borrowers across the country from a range of backgrounds.
“Our housing market needs a long-term vision, and one which is co-ordinated across Government and the wider industry. And it is paramount that this vision is underpinned by a strategy to address the pressing issues we are facing. For example, we don’t just need more homes – we need more homes of the right design, which are energy efficient and serviced by appropriate infrastructure such as roads, schools and hospitals.
“Our latest manifesto identifies the key areas that we believe should be a focus for the mortgage market and the Government in the year ahead.”
Summary of the key areas IMLA is urging the market to prioritise:
1. Housing supply and affordability
The imbalance between supply and demand in the UK housing market continues to keep property prices high. We remain convinced of the long-term financial benefits of home ownership – and this is underpinned by regular surveys which indicate that a majority of people do see home ownership as something to which they aspire. The British Social Attitudes Survey of 2018 reported that 87% of those surveyed would prefer to buy rather than rent—a proportion which has changed little over the previous 30 years.
The First Homes scheme was announced in May 2021 and Phase 1 of the pilot projects is about to go live. It is still relatively small-scale and its success will ultimately depend on the appetite of developers to get involved and self-fund the initiative. We have expressed some concerns about how borrowers using the scheme to buy their first property would be able to trade up in the future, given the requirement to sell at a 30% discount.
Affordability and stress testing
We understand the importance of protecting borrowers from over-extending themselves: however, the current approach to affordability means that borrowers are often being tested at completely unrealistic rates. We have consistently argued that the combination of the FCA’s affordability rules and the Financial Policy Committee’s additional stress test of 3% above SVR has prevented numerous prospective borrowers, including many first-time buyers, from stepping onto or up the housing ladder. We therefore welcome the news (announced on 13th December) that the Bank of England is to consult on removing the 3% stress test.
2. Serving non-standard customers
Our membership has always included a number of specialist mortgage lenders—and many of our “mainstream” members also offer a range of products for applicants who do not fit traditional “mainstream” criteria. This year we surveyed consumers and members to find out more about perceptions of what may and may not be possible. The results were very positive—we believe that many consumers would be able to find a mortgage to suit them if they were to approach an expert mortgage intermediary to advise them on what is available in the market. The over-riding message is – you may not be eligible for the lowest rates advertised, but that does not mean that you will not be able to get a mortgage. We will continue to emphasise this message and work with our intermediary colleagues to reach as many aspiring homeowners as possible.
3.The Green agenda—improving domestic energy efficiency
We accept that the domestic property market must play its part in helping to achieve net-zero carbon emissions by 2050. But proposals for obliging property owners to carry out improvement works must be carefully thought-through and subject to strict quality controls if limited resources—both materials and cash—are not to be wasted. We also believe that EPCs—on which so much reliance is currently being placed—need to be closely examined and assessed to ensure they are fit for purpose. There is a danger that piecemeal policy will lead to confusion and a variety of unintended consequences: the task is immense but the Government must lead in co-ordinating a strategy for planning, incentivising and funding work to improve the energy efficiency of Britain’s housing stock.
4. The Buy-to-Let market
Britain’s private rented sector is an essential component of the housing market, providing homes for one in five (20%) UK households. The sector has remained vibrant despite a ‘layering’ of policy changes introduced by previous administrations, but there could be more unwelcome measures in store, such as proposals to increase Capital Gains Tax rates to mirror income tax. IMLA has consistently argued that the Government should resist making additional changes that may deter landlords from further investing in the Buy to Let market, as this could lead to significant numbers exiting the sector. This would only push rents up—making the tenure more expensive for all tenants, and leaving those who are trying to save for deposits with less disposable income and thus less able to do so.
5. Finding a solution to the cladding crisis
Funding cladding remediation work on buildings following the tragic Grenfell fire remains a critical issue that the Government and housing sector must find a solution to, and quickly.
The costs of remediation work on existing structures are estimated to be anywhere between £15bn and £50bn. Yet, so far, the Government has promised just £5bn of funding to support the removal or replacement of dangerous cladding. The Secretary of State (Michael Gove)’s announcement (on 10th January) of a proposal to require property developers to come up with £4bn to fund removal of cladding, and new statutory protections for leaseholders, is welcome—but may still leave leaseholders facing large bills for remediation work to address other defects. Legislation must clearly identify where responsibility lies for defective construction and create a fair and proportionate system for funding ongoing maintenance of properties so that leaseholders are better protected in future.