Mortgage lenders calling on government to support SME builders
Mortgage lenders are urging the government to support smaller house builders in a bid to better address the current shortfall in supply. The industry is asking the government to promote lending to smaller businesses to encourage them to take on more projects and allow the sector to come closer to meeting demand.
The Intermediary Mortgage Lenders Association (IMLA) has released new figures that reveal 57 per cent of mortgage brokers and 61 per cent of mortgage lenders believe that increased government support for small builders could better address the current supply issue.
With the General Election taking place on June 8th, the IMLA has highlighted the fact that previous parties have not done enough to address the challenges being faced by the UK housebuilding sector. While a number of initiatives have been launched, no real solution to the problem of lack of supply has been found.
February's Housing White Paper, which was released by the government, showed that there was a lack of supply affecting the sector, however, the IMLA has criticised its failure to provide substantive solutions.
One of the main challenges for small and medium-sized house builders is the ability to obtain finance for projects, with a report from the National House Building Council Foundation (NHBC) finding it was the biggest concern for 20 per cent of them and the second biggest concern for 18 per cent.
Concerns about obtaining finance relate to its cost, availability and unfavourable loan-to-asset ratios. The research also found that many small and medium-sized builders said they have poor relationships with lenders, causing issues.
The IMLA's findings revealed that 44 per cent of lenders identify the high risk of builder defaults as being the main issue for providing finance to smaller firms. This was closely followed by builders turning away from traditional models of debt, with 35 per cent of lenders identifying this as an issue.
Peter Williams, IMLA executive director, said: "The mortgage industry clearly feels that supporting development finance lending to SME builders and developers would help increase in housing output.
"The IMLA is, therefore, calling on policymakers to explore how they can boost development finance lending. 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."