IMLA referred to changes to the buy-to-let tax relief and said the government needed to “beware” of making any changes to the private rented sector which may “disincentivise” landlords.
Future of Help to Buy
These proposals were made as part of the association’s General Election Wishlist where it also called for a new dialogue with lenders, housebuilders and the regulator on a replacement for the Help to Buy scheme.
It said the Shared Ownership scheme could be expanded to replace Help to Buy.
IMLA also noted that some lenders were considering introducing ‘top up’ loans for first-time buyers as an alternative, meaning loan to value could be increased while not requiring a lender to keep additional capital.
Stamp Duty reform
IMLA said stamp duty was still a “significant deterrent” to home movers and said a review of the tax was “overdue”.
It also claimed the relief of this tax to first-time buyers potentially increased the prices of properties they were thinking of buying “as it became clear that they would have more cash to play with”.
Unrealistic stress tests
IMLA also said the Financial Policy Committee’s stress test for prospective mortgage applicants was preventing first-time buyers from getting onto the property ladder as judging an applicant’s ability to make payments at three per cent on top of a lender’s standard variable rate was “excessive”.
IMLA said: “They are being subjected to stress tests set at rates much higher than they would realistically be expected to pay.”
Kate Davies, executive director of IMLA, said: “We’ve had 18 housing ministers in 20 years, but the structural challenges facing Britain’s housing market remain unsolved. Tackling the key issues around affordability and supply must remain a central part of the next government’s plan.”
IMLA’s General Election Wishlist – the key points:
- Affordability. IMLA wants to see a re-evaluation of the FPC’s stress-testing rules, as the current rate (standard variable rate + three per cent) is far above the rate most borrowers will realistically pay. This blocks people on lower incomes from getting on the housing ladder;
- Supply. More property is needed, with more discussion and consideration from government about the types and designs of properties being built;
- Help to Buy. Phased out in 2021 and removed by 2023. IMLA wants more dialogue between industry and government on what replaces Help to Buy;
- Shared Ownership. Expanding Shared Ownership could be part of the solution, but more work is needed on the government’s latest proposed changes to the scheme, particularly the practicality and cost-effectiveness of enabling consumers to staircase from as little as one per cent. For shared ownership to work, eligible properties need to be built in significant volume as part of a clear, consistent process by developers;
- Stamp Duty. This tax needs to be reviewed across the whole range of property values. A revamped structure could reduce the barriers to moving without significantly impacting tax revenues;
- Buy-to-let. IMLA argues against further government intervention in the sector. Buy-to-let needs breathing space and Britain needs a well-functioning private rental market;
- Mortgage Market Study. There is no need for large scale upheaval to try to help a small minority of borrowers;
- Mortgage prisoners. IMLA welcomes further investigation and support for affected borrowers but suggests not all are ‘trapped’. Of those who are, some will not be eligible for products with new lenders so the messages must be carefully managed so as not to raise expectations unduly;
- Protecting borrowers whose loans are sold to unregulated entities. IMLA supports the FCA’s regulatory reach being extended to give it power to require unregulated entities to comply with all of the appropriate regulations.