The Intermediary Mortgage Lenders Association (IMLA) is urging government to provide clarity around the future of the Help to Buy Equity Loan Scheme (HTB) to prevent destabilisation of the housing market.
IMLA, which represents 43 banks, building societies, specialist lenders and a large majority of first-time buyer (FTB) loan underwriters in the UK also aims to preserve the ability to offer FTBs home financing.
It notes that the scheme has been well-supported by its members and has contributed to key government targets such as helping more FTBs access the housing ladder since HTB was introduced in 2013.
Since then, 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. It is estimated that 43% would not have been able to purchase their home without HTB assistance.
The IMLA says that this has been a major contributor to restoring FTB lending to pre-crisis levels, with UK FTB mortgage approvals up by 34% since the scheme began.
As the government may make some adjustments to the scheme, IMLA warns against a policy cliff-edge that would leave many FTBs 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.
IMLA outlined all its concerns in a letter to the Chancellor, Philip Hammond, in September and was pleased to note the positive reference to HTB made by the Chancellor in his speech at the recent Conservative Party Conference.
“We are concerned that funding for HTB is due to be withdrawn in 2021, and that there has yet been no clear signal as to what, if anything, might replace it,” Kate Davies, executive director at IMLA, commented.
She believes that some form of government support should continue, given its success and its importance in boosting both home ownership and housing supply.
“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,” she continued.
If changes to the scheme are being proposed, lenders will need appropriate notice in order to plan ahead and deliver positive outcomes, hence IMLA’s wish to have clarity on the Government’s intentions as soon as possible, according to Davies.
“We look forward to hearing the Government’s plans and to working closely to continue the development of what has become a key element of housing policy.”