The UK’s new build market is dependent on the Help to Buy equity loan scheme and there needs to be a replacement when it expires in 2021, the Intermediary Mortgage Lenders Association has warned.
The scheme has supported 27% of housing completions and 5% of all housing transactions between April 2013 and March 2017.
IMLA called on mortgage lenders to work with the government and housebuilders to avoid a cliff edge situation when it expires.
Peter Williams, executive director at IMLA, said: “Government stimulus has played an important role in stimulating this market, and whether this means on-going support to help buyers with modest deposits to buy new properties is needed beyond 2021 remains to be seen.
“Industry should stand ready to support initiatives that ensure a healthy supply of new homes for first time buyers with modest deposits, while ensuring that the solution works effectively for lenders as well as housebuilders.”
IMLA also questioned the use of leasehold by housebuilders.
The society said some lenders have stopped lending on these properties because, owing to significant ground rent increases, there are question marks over their long-term value.
Lastly IMLA called on valuers to be vigilant about unjustified new build premiums.
When purchasing a new build there are advantages in the form of a home construction guarantee and lower running costs that result in a property price premium, but IMLA suggested the premium has risen excessively in recent years.
Williams added: “Aside from the impact of any decisions on the future of Help to Buy, lender sentiment towards new homes is influenced by the new build premium, builder incentives and ongoing concerns about the UK housing supply model which for a variety of reasons has consistently failed to deliver adequate number of homes to meet demand.
“Lenders will always see new build as different and, indeed, potentially riskier, but significant progress has been made in the last 10 years to put lending activity on a surer footing.”