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IMLA: Mortgage stress tests too tight

The Intermediary Mortgage Lenders Association has urged the next government to re-evaluate the Financial Policy Committee’s mortgage stress tests.

Lenders are currently asked to stress test mortgages at the Standard Variable Rate plus 3%.

IMLA said this is far above the rate that most will realistically pay, while it blocks people on lower incomes from getting on the housing ladder.

The trade body also called for more dialogue between industry and government on what happens when Help to Buy is phased out in 2021 and removed in 2023.

It also argued against further government intervention into buy-to-let.

Kate Davies, executive director of the Intermediary Mortgage Lenders Association, said: “IMLA is calling on the next government to put real focus and resources into solving the issues plaguing our housing market. We need the government to work with the industry to decide what happens after Help to Buy ends.

“We need to address the problems of affordability and supply. We need creative ways to get young people onto the ladder without being dependent on the Bank of Mum and Dad. We need to champion the crucial role the buy-to-let (private rental) sector plays in Britain’s housing market.”

In terms of other factors on IMLA’s general election wishlist, the trade body reiterated calls for more property supply, with discussion and consideration from government about the types and designs of properties being built.

IMLA also asked for further developments on shared ownership. It said more work is needed on the government’s proposed changes to the scheme, particularly the practicality and cost-effectiveness of enabling consumers to staircase from as little as 1%. For shared ownership to work, eligible properties need to be built in significant volume as part of a clear, consistent process by developers.

It called for a review into stamp duty, which it said could reduce barriers to moving without significantly impacting tax revenues.

Responding to the Mortgage Market Study, the trade body said there is no need for a large scale upheaval to try and help a small minority of borrowers.

While the FCA has been changing rules to help mortgage prisoners, IMLA said ‘messages must be carefully managed so as not to raise expectations unduly’ for those who can’t be helped.

The trade body called for the protection of borrowers whose loans are sold to unregulated firms. IMLA said it supported the FCA’s power being extended to require unregulated entities to comply with all of the appropriate regulations.