Mortgage industry implores government to support SME housebuilders

Research from the Intermediary Mortgage Lenders Association (IMLA) found that 61% of lenders and 57% of brokers believe government support for development finance would improve the lack of housing supply.

In the run-up to the general election, IMLA is urging policymakers to support lending to small and medium-sized housebuilders. It follows the organisation’s criticism of February’s Housing White Paper for outlining the issues but failing to offer solutions.

Data from the Department of Communities and Local Government reveals that new house completions were down 1% in the year to December 2016 compared to the previous twelve months.

Peter Williams, IMLA’s executive director, said: “IMLA’s research reveals that the mortgage industry clearly feels that supporting development finance lending to SME builders and developers would help increase in housing output.

“Successive governments have struggled to meet housebuilding targets, and the lack of solutions offered by the incumbent government in its Housing White Paper shows there is a need for new ideas. IMLA is therefore calling on policymakers to explore how they can boost development finance lending.”

Williams added that there are several ways this can be achieved, from promoting development finance, to guaranteeing loans to SME builders.

IMLA’s research among lenders found that they view a higher risk of builder default as the biggest challenge when it comes to providing development finance, with 44% of lenders identifying this as a key problem. This is followed by a lack of builder appetite for traditional models of debt due to a preference for mezzanine finance, which 35% of lenders identified as a key issue.

“By launching a guarantee scheme, or boosting lending to developers via the British Business Bank, policymakers could increase the flow of development finance and improve output in the sector,” said Williams.