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Duty bound

Writing this piece ahead of the Budget, I am fantasising that it might bring a slowly increasing volume of mortgage applicants.

We could debate on the expediency of monetary and fiscal stimulants in shaping the Budget’s content but regretably it is now this Government’s political wellbeing which will be the greatest influence in framing new legislation.

The illusory success of the G20 summit has been blanketed by continued redundancies, further shaming of politicians’ expenses and the smeargate scandal. It is clear that the egg-timer on the Brown administration is emptying and populist strategies will be frantically designed.

I am pretty hopeful, or simply deluded, that stamp duty will finally undergo meaningful reform. Why do so many Governments try to solve their most critical problems via a soundbite-friendly cocktail of part-solutions rather than grasping the single and emphatic solution staring them in the face?

I sense the Government may have realised its September concession on stamp duty and its attempts to revive the economy via a misguided VAT adjustment, the recapitalising of several banks and a programme of quantitative easing simply entail too lengthy a time lag to make an impact on voters’ perceptions.

Perception is everything right now. A survey by Unbiased.co.uk reveals almost one in five people believe to get a decent mortgage they need a 30 per cent deposit. One in two perceive that a lender’s standard income multiple is circa three. Lenders’ underwriting terms have hardened but not to this extent and it is apparent that the mood of the consumer has become decidedly morose and is prolonging the market’s comatose state longer than necessary. Conflicting house price indices make matters worse.

Back to stamp duty. Readers old enough to recall adjustments made to mortgage interest relief at source in 1988 will know what a fillip to property transaction levels that a bolder approach would produce.

Failing this, the Budget would need to resource some other means of getting lenders supporting the market above the 60 per cent LTV watermark, beneath which brokers and consumers are now holed. This sub-60 per cent LTV existence is the equivalent for the would-be first-time buyer of turning up to a join a golf club to be told only single-figure handicap golfers need apply. One answer might be a Government-sponsored mortgage indemnity guarantee premium above 75 per cent LTV.

In the final throes of any administration’s lifespan, it is self-preservation rather than intelligent governance which begins to shape policy. In much the same way that the authorities under-estimated the speed and depth of the downward spiral, they have overestimated the achievable ascent out of it. Half-baked policymaking now simply will not do. Regardless of the fact that over half of the Cabinet are staring down the barrel of joining the ranks of the displaced, a failure to reform stamp duty or to launch a Mig scheme can only speed the unemployment numbers towards three million and the return of election posters reading “Labour isn’t working”.

Kevin Duffy is managing director of Mortgageforce

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