Proprty news: Paul Bonett
In an occasional column Paul Bonett talks about the recent budget and how it affects the property market
The question has to be, how much difference will the recent Budget make to the housing market? In practice, it’s much too soon to tell. Nevertheless, opinion does seem to be pretty sharply divided!
Much was made of the new Help to Buy scheme. This comprises two elements. The first is a new shared equity scheme, starting next month,
and designed to help people buy new-build homes up to a price ceiling of £600,000. Essentially a revamp of previous schemes, it means that someone with a five per cent deposit will be eligible for a Government loan of a further 20 per cent – effectively making it possible to buy a new home with a 75 per cent mortgage. This has of course been welcomed by the house-building fraternity. However, previous schemes have proved fairly ineffectual.
The second and more significant element is a new £130-bllion mortgage indemnity scheme, whereby the Government will effectively stand as guarantor for people taking out up to 95 per cent mortgages to buy any property, old or new – again up to a price ceiling of £600,000. The aim is to stimulate the housing market as a whole – particularly, for example, helping “second-steppers” – those who want to move up to the next rung on the property ladder, but who are currently constrained from doing so by lack of savings or even negative equity.
A good idea? In theory, yes. However, serious questions are already being raised. For one thing, the scheme isn’t due to start until next January – so what’s going to happen in the meantime? Why would anyone struggle to buy now, if in a year’s time they can do so with a nice comfy taxpayer-backed mortgage? On the other hand, why would lenders run the risk of offering any high loan-to-value mortgages between now and next year, when the guarantee scheme kicks in? Some in the industry therefore see this as potentially sending the market into hibernation for the next nine months.
But in any case, should the Government be involving itself (and all of us) in artificially supporting the market in such a way? I’m not so sure.
“The Chancellor could have announced a root-and-branch reform of the Stamp Duty regime. That really would have helped”
Could the Chancellor have done anything different? Certainly – he could have announced a root-and-branch reform of the Stamp Duty regime. Now that really would have helped stimulate the market. But of course, it would also have hit the Government right where it hurts most, in the wallet!
Paul Bonett FNAEA MARLA Chair Team Association, www.bonetts.co.uk
