The Intermediary Mortgage Lenders Association (IMLA) has called for a root and branch review of current housing policy.
IMLA argues that a clear over-arching housing strategy is an essential requirement for the next government. This would replace a policy focus that it argues has frequently favoured “short-term, eye-catching – and also conflicting” – measures over the last 30 years. As a result, successive governments have prioritised specific market segments at the expense of others rather than following a cohesive strategy across tenures and parliaments, it says.
In its paper UK Election 2015 – criteria for housing and mortgage policy pledges, IMLA also asserts that regulators’ response to the financial crisis – and lenders’ responses to the new rules and their supervision – has created a more conservative mortgage market.
With owner-occupation set to fall from 64% to 59% over the next five years over the next parliament, IMLA calls for the next government to ensure a more appropriate balance of choice and protection for consumers, in place of fragmented policies and regulatory interventions.
The document sets out five specific requirements that should be tackled by the next government. These include:
- Establishing a programme for a properly managed withdrawal of government measures supporting the housing market
- Implementing a state or privately backed mortgage indemnity guarantee (MIG) to succeed Help to Buy and support high loan to value (LTV) borrowing in the long term
- Introducing measures to support downsizing by older households and increase liquidity in the housing market – along with a review of lending into retirement
- Carrying out a full review of the cumulative impact of regulatory changes for mortgage lending, including new capital adequacy requirements, macro-prudential rules and affordability assessments
- Engaging in an open discussion on the role of the sub-prime mortgage market in helping to meet consumer needs.
Peter Williams, executive director of IMLA, said: “There are difficult and worsening housing problems across most of the UK, which mean the housing and mortgage markets will be a dominant issue in the 2015 election. A number of key agendas demand a response from politicians, and the consequences of their actions are likely to be felt for many generations to come.
“We need to recognise that tenure patterns are changing and there is a wider diversity of housing needs in modern society than ever before. Homebuyers face much greater challenges as a result of house price rises and financial services regulation; private renters are confronted by high rental inflation and variable quality; and social renting no longer provides an adequate safety net for those who cannot afford to house themselves via the market.
“A ‘one-size-fits-all’ solution for housing policy is no longer viable, if it ever was. A root and branch review is essential if these conflicting priorities are to be addressed in a coherent manner. It is also time to put an end to ‘sticking plaster’ solutions that are barely effective in the current parliament. Housing is a long term challenge that demands long term solutions and one which requires cross party support.”
“Rising house prices, tighter mortgage lending criteria and a lack of house building are cumulatively increasing the challenges that homebuyers face,” said Patrick Bamford, director of mortgage Insurance Europe for Genworth.
“We’ve long stressed the need for a cohesive approach to tackling these problems, including a long-term plan to take over from the Help to Buy mortgage guarantee. This is critical to ensure that lending to first-time buyers does not fall back into a stupor as it did in the depths of the recession. It is welcome to see support on this from IMLA, whose latest paper calls for the introduction of a long-term mortgage guarantee scheme.
“There is a huge amount of scope to develop and improve upon Help to Buy. We remain a long way from a ‘normal’ market for first time buyers and greater high LTV lending is also needed to support long term house building ambitions. A permanent successor to Help to Buy would go a long way towards addressing two of the greatest challenges the industry faces: continuing access to homeownership and a sustained increase in housing supply.
“This should be transferred to the private sector and implemented well ahead of the end of Help to Buy 2 to achieve a smooth transition. Private mortgage insurers have the capacity and the willingness to take over from Help to Buy and build on the gains already made. This would reduce any risk to the tax payer while maintaining sensible checks to protect the financial system.”