UK Mortgage market is 'hard-wired' to reduce home ownership

14 June 2013

  • Just a third of young households could be owner-occupiers by 2020—just half the number seen in 1993
  • UK and EU regulations constraining lending volumes and innovation
  • IMLA calls on government to set out a long-term vision for homeownership

The UK’s status as a nation of homeowners may be permanently downsized by the fallout from the financial crisis, according to a new report from the Intermediary Mortgage Lenders Association (IMLA).
The IMLA report, Rebalancing the housing and mortgage markets – critical issues, looks at the radical changes in the housing and mortgage markets following the downturn, and argues that homeownership levels will continue to fall if the direction of market policy and regulation is left unchecked.

Without this just a third of young households – aged 25 to 34 – are likely to be owner-occupiers by the end of the decade: little more than half the number seen in 1993.

The report was authored by Professor Steve Wilcox at the University of York’s Centre for Housing Policy, with input from members of IMLA including banks, building societies and specialist lenders. IMLA members account for around 70% of mortgage lending through intermediaries.

Short-term measures mask a lack of vision

The paper highlights the continuing limits on the supply of mortgage finance, along with new Basel III and FCA regulatory requirements, as significant barriers to the scale of recovery which can be achieved in the current market.

While short-term, counter-cyclical measures such as the Funding for Lending Scheme (FLS) and Help to Buy have been introduced to promote economic growth, IMLA’s view is that this has occurred without a wider debate on the long-term purpose of the private housing and mortgage markets which Lord Adair called for when launching the Mortgage Market Review.
Instead questions remain about the future of the nation’s homeowning ambitions, the desired balance between the homeowner and private rented markets, and the consequences of UK and European regulation for lending volumes and product innovation.
Urgent dialogue needed to clarify long-term strategy:
As a result, the report calls for urgent dialogue between government and industry on rebalancing the housing and mortgage markets, with the onus on government to:

  • develop an overarching housing strategy across all tenures that unites the current, disjointed initiatives
  • determine a long term vision for home ownership and the extent of its support for the nation’s ambitions in this area
  • offer an effective safety net for homeowners facing unexpected adverse changes in circumstance by reforming Support with Mortgage Interest (SMI) or developing public-private sector partnerships
  • encourage higher rates of home building to improve the balance of supply and demand.

Peter Williams, Executive Director for IMLA, comments

“In the wake of the recession there has been a growing appetite for rebuilding the housing and mortgage markets in a way that is sustainable through the economic cycle. Limiting the risk for borrowers and lenders is of course a vital part of this process, but there are wider implications for households, the market and the wider economy that simply cannot be ignored.

“Generations of Britons have been raised with the ambition of owning their own homes, which has become a key part of our national identity. But this goal threatens to disappear from view unless we consider what kind of market we want to create for the future and what can be achieved within the scope of mortgage regulations and available finance.

“There is a clear onus on lenders to ensure mortgage products are simpler to understand and provide customers with a long-term service that caters to their evolving needs. Beyond that, we urge the government to recognise and act on these critical issues that will shape the future of the market, so we are not left dealing with unintended consequences further down the line.”

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