View more on these topics

Confidence tricks

Last week’s Budget was memorable for what it failed to do for the housing market rather than the “underwhelming” measures the Chancellor did lay down.

Chancellor Alistair Darling outlined plans for increased support to mortgage borrowers in arrears, an extension of the stamp duty holiday for properties under £175,000 and a pledge to guarantee £50bn of mortgage-backed assets.

But the industry hit back at these plans immediately. Exact managing director Alan Cleary says: “This Budget was totally underwhelming, it did nothing to help the market. There were a million things that Darling could have offered but he did not.”

What would have helped? Mortgage expert Jonathan Cornell believes a large, sweeping gesture would have gone a long way to boost market confidence. He says: “I was expecting something huge, like a temporary holiday for all stamp duty, not just an extension of the £175,000 threshold. But all the Budget offered us was window-dressing.”

Before the Budget, John Charcol senior technical manager Ray Boulger argued that a full cessation of stamp duty would have been helpful and cheap to offer. He says revenue from stamp duty has collapsed after a 60 per cent drop in property transactions and 25 per cent decrease in prices.

He calculates that this drop has taken some properties out of the net completely and has moved many homes down the band ratings, meaning the Government only makes around £2bn a year from the tax. Boulger says: “Forgoing this would have only cost about one-sixth of the cost of the one-year VAT cut.”

There was also criticism of Government plans to invest a further £80m into the shared equity HomeBuy Direct Scheme, a state incentive that offers first-time buyers a loan for a newbuild property.

Savills director Melanie Bien feels the Chancellor missed a trick in not offering anything to the oversubscribed MyChoice HomeBuy scheme, which offers shared-equity incentives on existing properties: “This is aimed at helping developers, not borrowers.”

Another missed opportunity was the Government’s asset guarantee scheme. In the Budget, Darling pledged to guarantee £50bn of mortgage-backed assets for six months. The assets must have been originated after 2008 by banks and building societies, and must be made up of AAA securities.

But Homefunding chief executive Tony Ward notes: “The guarantee is good but not that good. What the Budget should have done is allow the Bank of England to create a secondary market itself and begin buying up assets.

“Alternatively, the bank could offer the discount window facility to non-banks such as pension funds. Then they could make money back on the assets they choose to buy.

“Just guaranteeing an AAA security is not going to make it more attractive to investors.”

Boulger adds: “This was a great opportunity for an innovative funding scheme or a radical pledge to stimulate the market. But you cannot help thinking this was just the Government playing politics, hiding the fact that it has not got the money to do anything.”


Planning for the unexpected

IFAs who do not offer business protection insurance are turning their back on a lucrative market and one desperately in need of advice and guidance.

Retirement - thumbnail

A downhill stroll?

The Department for Work and Pensions (DWP) has recently published new research, which once again demonstrates how the prospect of retirement is changing for older workers.


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm