New research has revealed that the majority of mortgage lenders and brokers believe that greater government support for lending to small and medium-sized housebuilders is needed to help solve the UK housing crisis.
According to the Intermediary Mortgage Lenders Association, 61% of lenders and 57% of brokers believe that government support for development finance would improve the lack of housing supply.
In the run-up to the general election on 8 June, IMLA is urging policymakers to support lending to small and medium-sized housebuilders.
Peter Williams, IMLA’s executive director, said: “Successive governments have struggled to meet housebuilding targets, and the lack of solutions offered by the incumbent government in its housing white paper shows there is a need for new ideas.
“IMLA is therefore calling on policymakers to explore how they can boost development finance lending.”
IMLA was critical of the government’s recent housing white paper as it failed to offer significant solutions to solving the UK housing crisis.
SME housebuilders have said that obtaining finance is one of the principal challenges they face when it comes to delivering new homes.
Some builders have also suggested they have a poor relationship with lenders – although this is reported to be improving.
Given lenders’ fears of SME-builder default, IMLA suggests a government-backed guarantee of loans to SME builders is one policy that should be explored to give lenders greater confidence.
The body also believes the government should examine giving further support for lending to SME builders through loans via the British Business Bank.
“There are several ways through which this can be achieved. As well as promoting development finance, the government should explore a scheme that guarantees loans to SME builders. Our research reveals that lenders view the biggest obstacle they face in development finance is a higher risk of builder default,” said Williams.
“At the same time, builders report that accessing finance is an obstacle to increasing their output. By launching a guarantee scheme, or boosting lending to developers via the British Business Bank, policymakers could increase the flow of development finance and improve output in the sector.”
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