"Given that regulatory changes could further impact on this market there is a question as to how this vital segment can be expanded."
So far, 90,000 new home sales have been made under the Help to Buy equity loan, NewBuy and FirstBuy schemes and a further 74,000 mortgages have been completed with the support of the Help to Buy mortgage guarantee scheme, but IMLA believes that the government has "failed to reverse the decline in homeownership".
Between 2010 and 2013 (the latest year for which data is available) the number of owner-occupied homes in the UK fell by 270,000.
In research conducted in March 2016, 39% of aspiring first-time buyers cited access to a large enough mortgage as one of the main barriers they faced to buying a home – higher than the 34% citing the affordability of mortgage payments.
According to IMLA, "this implies that many first-timers are unable to borrow a sum they consider to be affordable, which could suggest over-regulation of the market".
Overall, raising a deposit was identified as the biggest barrier to homeownership, cited by 61% of aspiring first-time buyers.
IMLA is now calling for a "refocus on the rules surrounding mortgage availability". In particular, IMLA believes the UK interpretation of the capital rules for high LTV loans supported by mortgage indemnity insurance is unreasonably harsh and should be made less onerous to assist higher LTV lending.
In its report, IMLA said: "Though the Government was right to view the Help to Buy mortgage guarantee scheme as a short term measure to assist this higher LTV market to recover, in reality such loans are still in short supply. Given that regulatory changes could further impact on this market there is a question as to how this vital segment can be expanded."
Peter Williams, Executive Director for IMLA, commented: “Politically, homeowners are a crucial demographic for the Conservatives, so the Government is throwing its weight behind a variety of different schemes to try and boost first-time buyer numbers. But current policy is still missing the mark and failing in its objective of maintaining homeownership levels. This is partly because saving for a deposit and accessing high loan-to-value mortgages remain ongoing challenges for first-time buyers. Mortgage repayments are cheaper than ever but many first-timers simply don’t qualify for a mortgage as they can’t stump up the starting sum.
“Government has moved from an overall focus on supply regardless of tenure to a new policy centred on supply built around home ownership with the risk of making a bad situation worse. The latest move to control the rental market by taxing landlords is an own-goal by the Government. It is likely these costs will simply be passed onto tenants as landlords look for other ways to maintain their profits, making the challenge of saving for a deposit an even harder struggle and it will reduce the flow of investment into new homes for rent. There is a longer-term risk too that it has created a more volatile political environment in the housing market which may impact on owners and investors. The current political attitudes to the private rental sector are ill-focused and short-sighted.”
