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He says: “The database on tax returns is a minimum of nine months out of date.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.”