The Intermediary Mortgage Lenders Association (IMLA) is seeking clarity from the government around the future of the Help to Buy Equity Loan Scheme (HTB).
The trade body, which represents 43 UK banks, building societies and specialist lenders, is looking to avoid destabilisation of the housing market and preserve the ability to offer first-time buyers home financing.
IMLA, which represents the large majority of first-time buyer loan underwriters in the UK, says that the scheme has been well-supported by its members and has had significant success in contributing to key government targets such as helping more first-time buyers access the housing ladder since HTB was introduced in 2013.
To date, the HTB equity loan scheme has resulted in almost 170,000 new homes being built and purchased in England, 81% of which were by first-time buyers. Furthermore, it is estimated that 43% would not have been able to purchase their home without HTB assistance. IMLA argues that this has been a major contributor to restoring UK-wide first-time buyer lending to pre-crisis levels, with UK first-time buyer mortgage approvals up by 34% since the scheme began.
IMLA says it recognises that the government may wish to review the current scope of the scheme and possibly make some adjustments, but warns against a policy cliff-edge that would leave many first-time buyers unable to secure a mortgage. With the support of HTB, mortgage lenders have been able to offer loans to younger borrowers who otherwise would not have been able to secure funding for a new build property under existing prudential lending criteria.
In September, IMLA outlined all its concerns in a letter to the Chancellor, Philip Hammond. It was hoped that an announcement might be made at the recent Conservative Party Conference, and IMLA says it was pleased to note the positive reference to HTB made by the Chancellor in his speech.
Kate Davies, executive director at IMLA, said: “We are concerned that funding for HTB is due to be withdrawn in 2021, and that there has as yet been no clear signal as to what, if anything, might replace it.
“Given its success – and its importance in boosting both home ownership and housing supply – we believe that some form of government support should continue.
“Lenders and borrowers place heavy reliance on the scheme, and a major step-change to arrangements would risk significant market disruption and potentially undermine the government’s ambitious targets for new housing supply.
“If changes to the scheme are being proposed, lenders will need appropriate notice in order to plan ahead and deliver positive outcomes – hence our wish to have clarity as soon as possible on the government’s intentions.
“We look forward to hearing the government’s plans and to work closely to continue the development of what has become a key element of housing policy.”