It comes despite improving sentiment towards market conditions following a period of changes to lending criteria.
IMLA’s previous research in July 2014 found that 45% of brokers and 33% of lenders reported worsening market conditions following the implementation of the Mortgage Market Review and with new macro-prudential controls on the horizon.
Their pessimism has since softened with just 23% of brokers and 21% of lenders feeling the same way in January 2015. Over half of brokers (51%, up from 41% in July) and lenders (53%, up from 44% in July) now feel market conditions are currently improving.
However, IMLA’s research reveals 84% of brokers were unable to source a mortgage for at least one client during the last six months, up from 78% who said the same in July 2014.
53% of brokers were unable to help a client with adverse credit; 53% were unable to help an interest-only borrower; 50% were unable to help a customer seeking to borrow into retirement; and 46% were unable to help a client who was self-employed or had an irregular income.
Overall, brokers and lenders both identify low income borrowers and those with dependents as the two consumer groups who have been most impacted by reduced access to finance following the MMR.
Among the new rules, interest rate stress tests are seen to have had the biggest effect in reducing the amount people can borrow. More brokers and lenders report that the new rules are having an impact than was the case in July.
Almost two fifths of brokers (39%) feel product availability has increased following the MMR, while just 18% feel it has reduced. Yet opinion is more evenly split on product flexibility: 27% of brokers feel this has improved but 23% disagree.
Peter Williams, Executive Director of IMLA, comments:
“Regulation is vital to ensure that mortgage lending is safe and in proportion to consumer needs and the wider economy. But when families with dependents are among those who find themselves at a disadvantage, there are legitimate concerns that the pendulum has swung too far as a result of successive, incremental measures.
“The market is clearly still adjusting to changes including the MMR and the Financial Policy Committee’s interventions. With the European Mortgage Credit Directive (MCD) on the horizon and the latest Basel Committee proposals, it will become even more of a challenge to understand the individual impacts of these different interventions. What’s clear is that each new layer of control squeezes more people out at the margins. As the boundaries grow tighter, we must work to avoid unintended social engineering as a result.
“Current trends suggest that owner-occupation may fall below 62% by the end of the next parliament, and there is a real need for government, regulators and industry to pause and assess the lie of the land. Efforts must focus on striking the right balance between innovation and protection to avoid frustrating people’s legitimate ambitions to own their own homes.”
