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Holiday is over for stamp duty

By Jonathan Cornell

It was disappointing to see that the stamp duty holiday is not being extended at the end of the year but it is not really surprising as the Chancellor pointed out that the US and UK housing markets are stabilising.

House prices have stopped falling but transaction levels are still hugely down on “normal levels”. I would imagine there will be a lot of very busy homebuilder firms and estate agents trying to finalise sales between now and the new year.

This will create a bubble at the level just below the higher threshold and will cause problems trying to sell properties immediately above this level.

According to the Chancellor’s figures, the stamp duty holiday has helped 240,000 people get in the property market without paying stamp duty.

It was good to see that the mortgage interest support scheme has been extended by an extra six months to help pay the interest of unemployed borrowers’ mortgages.

Unlike the Budget, there were no additional headline-grabb- ing rescue schemes for the mortgage market.

Recent figures have shown that the much heralded mortgage rescue scheme which intended to use a £285m package of measures designed to prevent some of the most vulnerable families losing their homes and experiencing the trauma of repossession has only helped about 100 people. This scheme was aimed at those who would be eligible for homelessness assistance.

The scheme was very badly thought-out and was launched without industry consultation which explains why it has been so unsuccessful.

The Chancellor pointed out that repossession levels are running at only 50 per cent of the figures for the last recession but this is mainly down to pressure brought upon the lenders by the FSA and a growing reluctance to force sales in a restricted market rather than from Government efforts.

The additional 50 per cent tax paid by banks on bonuses to bankers is clearly going to make it much more expensive for banks to pay their top bankers the bonuses which they were expecting in the next few months. This is going to be very bad news for many companies which traditionally benefit from increased sales during bonus season. This is going to have an impact on high-end car dealerships, jewellers and estate agents.

Property has always been a popular area for bonuses. I suspect that in the coming months, lenders will further reduce the amount of bonuses which borrowers are allowed to use to support their new mortgage.

So, in summary, no good news for the mortgage and property markets.

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  1. Michael White CEO Emailmortgages 14th December 2009 at 4:46 pm

    Completely agree, the Chancellor’s decision not to extend the holiday for stamp duty up to the £175k threshold is another kick in the teeth for the market and first-time buyers in particular.

    The potential saving this would have provided could have gone towards a greater deposit and helped many more secure lower rates. It’s unfortunate that this is not to be, although those looking to supplement their deposit by gambling down the Bingo hall do have the cold comfort of Bingo duty being cut by 2%!!

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