IMLA reacts to Chancellor’s plans for housing market

The Intermediary Mortgage Lenders Association (IMLA) has welcomed the government’s decision to extend the stamp duty holiday to June.

Rishi Sunak announced at the Budget yesterday that the £500,00 nil rate band will remain in place until 30 June, before being tapered down to £250,000 until 30 September. The threshold will then return to £125,000 from 1 October.

IMLA had last week backed plans for a three-month extension to the holiday beyond March, as well as a flexible wind-down to the scheme, suggesting this would avoid a “cliff-edge” deadline simply being postponed to the end of June.

However, the trade body has warned the new plans may still not prevent thousands of home buyers from failing to complete their purchase before the June deadline.

“The government has rightly taken on board industry feedback about the stamp duty holiday and has chosen both to extend the tax incentive and taper its eventual withdrawal,” commented IMLA executive director, Kate Davies.

“IMLA asked specifically for added flexibility to the scheme’s deadline to prevent harm to those who stood to miss out, while also avoiding a simple extension of the scheme that would only have postponed the inevitable cliff-edge impact.

“That has not been included – so it will remain important for estate agents, intermediaries, lenders and conveyancers to continue to manage consumers’ expectations in the light of what may continue to be a very busy period between now and the end of June.

“As the weeks go by, those who have not already started the process of buying a home will become increasingly unlikely to complete their purchase by that first deadline. We may also see prices rise as activity remains buoyant.”

The Budget also saw the Chancellor confirm the government’s plans for a mortgage guarantee scheme, which will allow both existing homeowners and first-time buyers to get a “government guarantee” on mortgages with a deposit of 5%, to purchase properties worth up to £600,000.

“The news of a government-backed mortgage guarantee scheme will also help some lenders return to the high LTV sector,” Davies said.

“We shall need to digest the detail – and assess how this scheme differs from its predecessor, which attracted relatively low take-up, with buyers accessing just £2.3bn of the £12bn of guarantees offered.

“Some lenders would prefer a simpler model of high LTV lending, which could be enabled via a revision of the current loan-to-income and stress testing requirements.”

Davies also highlighted the lack of attention in the Budget given to improving the energy efficiency in homes across across the UK.

IMLA recently criticised new government proposals requiring lenders to report on the energy ratings of properties they lend against, after suggesting they could lead to lenders spending disproportionate time and effort to ensure their average energy ratings are at an acceptable level.

The trade body had also voiced concern that the compilation of an energy efficiency “league table” could cause lenders to base their lending decisions on a property’s energy efficiency, rather than on a borrower’s needs.
“The Chancellor’s announcement was silent on specific plans to improve the energy efficiency of Britain’s housing stock,” Davies added.

“Green Bonds can only go so far, and more incentives will be needed to help homeowners overcome the existing barriers to making home improvements, such as the high cost of effective remedial work and the fact that pay-back periods may be unrealistic.”

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