The Chancellor’s emergency Budget must tackle the mortgage funding crisis, the Intermediary Mortgage Lenders Association (IMLA) is urging.

IMLA wants clarity and direction from the new coalition Government on how it intends to support the supply of mortgage funding.

The trade body warns there is a risk the mortgage funding drought could worsen as lenders repay government support schemes, and the banking sector works through an evolving regulatory environment, both domestically and internationally.

IMLA believes the housing and mortgage market are central features of the economy and requires support to enable it to return to a healthy and sustainable level.

Peter Williams, IMLA executive chairman, said: “The Budget hangs heavily over the housing and mortgage market.

'Whilst we do not expect the Chancellor to address the myriad of housing issues, he needs to recognise we have a mortgage funding problem which is preventing the housing market from making its full contribution to the critical issue of meeting housing demand.”

There is a risk the Budget will be dominated by cuts, which are only part of the overall solution to the UK's problems, Williams said.

IMLA has also called on the Chancellor to consider the impact of any changes to Capital Gains Tax (CGT) on the private rented sector (PRS).

IMLA believes residential property investment should be treated as an entrepreneurial activity for the purposes of CGT treatment to encourage the continued investment in the sector by private landlords.