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Pre-budget report disappointing for property market

Thursday 10th December 2009

The Stamp Duty holiday will end on 31 December as predicted as the Association for Mortgage Intermediaries (AMI) slams the government’s lack of support for the housing industry in its pre-budget report.

Robert Sinclair, director of AMI, said: “It is disappointing that the Chancellor has failed to extend the stamp duty holiday on properties under GBP 175,000 that will finish at the end of this month. The housing market is showing signs of recovery but a further stimulus is required. The Government should also carry out a full review of the stamp duty regime. At present, it both distorts the housing market and places a disproportionate burden on first-time buyers."

He added that the extension of the Mortgage Interest Scheme will help some homeowners who experience mortgage difficulties and this, combined with lender forbearance, is helping many people in financial difficulty stay in their homes.

But he said the lack of mortgage competition continues to hold the market back. “The commitment to work through the Council for Financial Stability on Mortgage Backed Securities needs accelerating together with the promise to clarify the rules on Covered Bonds. We will continue to seek government support for our proposal to draw Building Societies and non-banking institutions back into lending.”

The Council of Mortgage Lenders also welcomed the government’s extension of its support for those struggling with mortgage repayments.

It said: “Payments of income support are helping around 100,000 households stay in their homes, and a further 113,000 older home-owners are receiving help with their mortgage through pension credits.”

The CML also notes the government's intention to explore ways of encouraging more sustainable, transparent and standardised markets for UK mortgage-backed securities, and looks forward to seeing more details.

The CML's director general Michael Coogan said: "In a low-interest rate environment, and with so much progress being made by lenders and borrowers together, it is no surprise that the back-stop government schemes have not been widely used. This situation may change if pressures build, as interest rates rise in the future. So we are committed to continuing to work with the government to ensure the best possible outcomes for borrowers going through short-term financial difficulties."

David Brown, commercial director of LSL Property Services welcomes the Government’s decision to keep capital gains taxes at the same rate in order not to damage vital funding to the private rented sector.

“On the face of it, it might look great value for the tax-payer that buy-to-let landlords should contribute more to the government’s coffers. When capital gains tax was cut to 18 per cent, it was not designed to help landlords, but it did make property investment a more attractive proposition. But, hiking up the tax-rate would have created a strong disincentive to investment in the private rented sector. At a time when there is a chronic shortage of housing stock to house our growing population, and no money to expand social housing, the private rental sector is a cornerstone of housing provision."

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