Executive Director Kate Davies comments: “Despite – and in some cases because of – the continued Covid-19 pandemic, 2021 has remained a very busy year for the housing market. Amid this continued demand, there are still many areas we need to focus on to support the market and ensure it is accessible to borrowers across the country from a variety of backgrounds.
“Our housing market needs a long-term vision, and a coordinated vision across government and industry at large. And it is paramount that this vision is underpinned by a strategy to address the pressing issues we face. For example, we don’t just need more homes – we need more homes that are well-designed, energy-efficient and served by proper infrastructure such as roads, schools and hospitals.
“Our latest manifesto identifies key areas that we believe should be a priority for the mortgage market and government in the coming year.”
Here is a summary of the key areas that IMLA asks the market to prioritize:
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 backed up by regular surveys which indicate that a majority of people see home ownership as something they aspire to. The 2018 UK Social Attitudes Survey found that 87% of respondents would rather buy than rent – a proportion that has changed little over the past 30 years.
The First Homes program was announced in May 2021 and phase 1 of the pilots is about to start. It’s still relatively small, and its success will ultimately depend on whether developers are willing to get involved and self-fund the initiative. We have expressed some concerns about how borrowers using the program to buy their first property might trade in the future, given the requirement to sell with a 30% discount.
Affordability and stress tests
We understand the importance of protecting borrowers from overspending: however, the current approach to affordability means that borrowers are often tested at completely unrealistic rates. We have always argued that the combination of FCA affordability rules and the Financial Policy Committee’s additional stress test of 3% above the SVR has prevented many potential borrowers, including many first-time buyers, from going up or climb the housing ladder. We therefore welcome the news (announced on December 13) that the Bank of England must consult on the removal of the 3% stress test.
2. Serve atypical customers
Our members have always included a number of specialist mortgage lenders – and many of our ‘traditional’ members also offer a range of products for applicants who do not fit the traditional ‘traditional’ criteria. This year, we surveyed consumers and members to learn more about perceptions of what can and cannot be possible. The results have been very positive – we believe that many consumers would be able to find a suitable mortgage if they spoke to an expert mortgage intermediary to advise them on what is available in the market.
The overriding message is: you may not qualify for the lowest advertised rates, but that doesn’t mean you can’t get a mortgage. We will continue to emphasize this message and work with our fellow midstreamers to reach as many aspiring owners as possible.
3. The green agenda – improving home energy efficiency
We recognize that the national property market must play its part to help achieve net zero carbon emissions by 2050. But proposals to require landlords to carry out improvements must be carefully considered and subject to checks. strict quality standards so limited resources – both materials and money – are not to be wasted.
We also believe that the EPCs – on which so much is currently relied upon – need to be closely examined and evaluated to ensure that they are fit for purpose. There is a danger that a piecemeal policy will lead to confusion and various unintended consequences: the task is immense, but government must lead the coordination of a strategy of planning, incentivizing and funding work to improve the energy efficiency of UK housing stock.
4. The Buy-to-Let market
The UK private rental sector is a key component of the housing market, providing homes for one in five UK households (20%). The sector has remained vibrant despite an “overlay” of policy changes introduced by previous administrations, but there may be other unwanted measures in store, such as proposals to increase capital gains tax rates for reflect income tax.
IMLA has always argued that the government should refrain from making additional changes that could deter landlords from further investing in the Buy to Let market, as this could lead to significant numbers of exits from the sector. It would only drive up rents, making rent more expensive for all tenants and leaving those trying to save for deposits with less disposable income and therefore less able to do so.
5. Find a solution to the siding crisis
Funding for the remediation of building cladding following the tragic Grenfell fire remains a critical issue that the government and housing sector need to address, and quickly. The costs of rehabilitation work on existing structures are estimated at between £15 billion and £50 billion. Yet so far the government has only pledged £5billion in funding to support the removal or replacement of hazardous coatings.
The announcement by the Secretary of State (Michael Gove) (January 10) of a proposal to compel property developers to provide £4billion to fund the removal of siding and new legal protections for tenants , is welcome – but can still leave tenants facing big bills for remedial work to remedy other faults. Legislation should clearly identify liability for faulty construction and create a fair and proportionate system of funding the ongoing maintenance of properties so that tenants are better protected in the future.