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Darling fails to fix flaws in housing

Mortgage experts have attacked the Government’s housing market proposals set out in the Budget, saying they show a lack of understanding of the market.

Darling duo: The Chancellor with his wife Margaret on Wednesday
Darling duo: The Chancellor with his wife Margaret on Wednesday

In Wednesday’s Budget, Chancellor Alistair Darling announced a doubling of the stamp duty threshold to £250,000 for the next two years and a new permanent 5 per cent rate of stamp duty for any property over £1m from 2011/12.

But statements from state-owned Lloyds and RBS show their mortgage lending commitments will fall in the coming year – RBS from £12.7bn to £8bn of net lending and Lloyds from £25bn to £23bn of gross lending, excluding remortgages.

The Government also revealed that HM Revenue & Customs is looking to establish an income verification service for lenders.

Industry consultant Mark Chilton says, taken as a whole, the mortgage proposals show a “continued lack of understanding of the UK mortgage market”.

He says that first-time buyers will still find that mortgage deals are out of reach.

John Charcol senior technical manager Ray Boulger believes the stamp duty changes are the wrong approach. He says: “It would have been much more sensible to increase it for everybody. What will now happen is that first-time buyers will actually have an advantage over non-first-time buyers for properties between £125,000 to £250,000.

“A lot of people might say that is fine but I don’t think it is as simple as that. What about second-time buyers who will be in a worse position?”
Building Societies Association director general Adrian Coles says the stamp duty move is welcome but fails to address “fundamental flaws” with the tax.

Vantis head of private clients Chris Maddock warns that there are questions over how the definition of first-time buyer will be policed.

Chilton also hit out at the HMRC income verification service as “totally impractical”.

He says: “The database on tax returns is a minimum of nine months out of date. A recently redundant loan applicant could get a positive verification and applying for the income reference will just take too long.”

Association of Mortgage Intermediaries director general Chris Cummings criticised the verification scheme. He says: “It is the Government trying to restrict the mortgage market again and trying to control the cost of housing. This will have an impact on mortgage intermediaries
because it means they will have to be far more vigorous in assessing people’s ability to pay and show a lot more evidence.”


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There are 10 comments at the moment, we would love to hear your opinion too.

  1. There are fundamental flaws in the housing market and the government know it. This will do nothing to prevent the correction. We’re just at the turning point of the bull trap.

  2. The fundamental flaw to the housing market is that is not being allowed to function as a ‘market’.

    It has been the subject of political manipulation and boiler room pumping by interested parties for the past ten years.

    What it needs it to be able to find a true equilibrium, even if that means deflation in the short term.

  3. There shouldn’t be SDLT anyway. Taxes should be based on economic activity not on people having having to move home to chase another job.

  4. I earn 32500 a year and my wife part time 5000 per year, we have 23 children and are renting at the moment, we can not afford to get a mortgage on the house we currently rent. We cannot save for a deposit. To buy the house I rent would mean me borrowing 5.5 times our earnings. The problem is not mortgages finance or even the banks. House prices are way to high. I should be borrowing at best 4 times my earnings. I will nver own a house at this rate. I will not take out an interest only mortgage just so i can afford to rent it of a bank and then tell everyone I own it. Interest only mortgages should be banned.

  5. Chris Cummings criticised the verification scheme.
    He says: “It is the Government trying to restrict the mortgage market again because it means they will have to be far more vigorous in assessing people’s ability to pay and show a lot more evidence.”

    Fraudsters will be policed now ?

    For a change .

    Bummer :-((

    Chris Cummings will have a smaller bonus .

    Heinous .

  6. No one is going to remember the “stamp duty relief” debacle after the real corrections hits.

    Fake interest rates, and FTB bribes are just going to make the final reckoning a whole lot worse.

  7. The government again show their disregard for citizens by suckering a new bunch of first-time buyers into a market on the brink of collapse. We’re 18 months to 2 years behind the US in this cycle, and where prices boomed there, there have been 50% plus falls.

  8. To Mr Cadle – you need Birth control – not to worry about getting a mortgage!

  9. A sustainable housing market cannot exist on simple demand over supply as it does at present. With new mortgages at 8 x BOE base rate plus huge arrangement fees, Lloyds predict a halving of their new mortgage lending and HMRC to varify income, these 4 factors will I predict bring about a a monumental double dip property crash. Mike Holmes is correct when he mentions the 50% fall in the US but the same has happened in Spain and Portugal. Most stockmarkets have seen similar falls from their all time highs and lets not forget commercial property, why didn’t we see similar in resi property? Unless banks start to lend lend our money back to small and medium size businesses plus a totally pragmatic approach to resi mortgage lending then similar falls in property prices will be the result irrespective of the election result. I fear the worse will happen and I have advised my 3 daughters who are in their 20’s to put off buying in the foreseeable future and wait for this almighty mess to be sorted. Recent price increases are a false dawn and a massive double dip fall remains a distinct possibility!

  10. I have recently split from my partner and we jointly own a house I only earn a mere £22,000 a year full time and there’s no way I’m going to get a mortgage – we brought our house at the peak so it’s now lost money so we’re forced to live together for the time being which is extremely stressful and when we sell we will have no money out of it whatsoever for a deposit on a future home – my current lenders said I will need a minimum of 15% but ideally to get more money (ie to get a house in a half decent area where Im not going to get mugged on my way home from work) I would need 25%!. I am going to be renting and that’s going to suck up all my earnings so how am I supposed to save! – rent is far too high in this country. I am in my 30’s and don’t want to be renting for years and then they say NI is going up next year – why ? so I can pay for yet more mothers at 15 pushing their prams around buying clothes in my lunchhour when Im stressed rushing back to work?? – rather than stinging those with expensive homes too saying they have to pay more stamp duty why not for once sting those who clearly don’t want to work. If people want to work hard and make money in this country they should be allowed to do so – I will never have a £1 million house but then I do not have the drive to do so or to work that hard – that’s my problem if others want to they shouldn’t have to keep on getting heavily taxed for it – get the lazy people of the British population back to work and stop helping out young girls having kids and we might start raking some money back in. Why should people be working now well into their 70’s when there’s fit and healthy 20 years olds who choose to sit at home all day watching Jeremy Kyle? If you’re an adult you should be made to be responsible for your own actions.

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