Indeed, just a third of young people could be owner occupiers by 2020, just half the number seen in 1993, according to the report commissioned by the Intermediary Mortgage Lenders Association (IMLA).
It says that both UK and European Union regulations are holding back lending volumes and innovation and it is calling on the UK government to set out a long term vision for home ownership.
Currently the UK’s status as a nation of home owners may be permanently downsized by the fallout from the financial crisis, says the report; Rebalancing the housing and mortgage markets – critical issues, written by Professor Steve Wilcox of 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.
It looks at the radical changes in the housing and mortgage markets following the downturn, and argues that home ownership levels will continue to fall if the direction of market policy and regulation is left unchecked.
It 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 home owning ambitions, the desired balance between the home owner and private rented markets, and the consequences of UK and European regulation for lending volumes and product innovation.
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 and determine a long term vision for home ownership and the extent of its support for the nation’s ambitions in this area.
It also says that the government should offer an effective safety net for home owners facing unexpected adverse changes in circumstance by reforming Support with Mortgage Interest (SMI) or developing public private sector partnerships and encourage higher rates of home building to improve the balance of supply and demand.
‘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,’ said Peter Williams, executive director of the IMLA.
‘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,’ he explained.
‘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,’ he added.
