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Kevin Duffy on mortgages

Chancellor Gordon Brown appears to be showing little resolve in helping first-time buyers. How else can you explain some contradictory pre-Budget proposals and the disturbing findings of the simultaneously published Barker report?

Working for Hamptons International, where our average property sale is over £600,000, you might be curious as to why FTBs should rank as significant. Well, it is these buyers who ignite chain reactions further up the ladder. Alarmingly, however, FTBs now account for barely 10 per cent of a £280bn market and the Budget may make this worse. The possible introduction of US-style real estate investment trusts will favour wealthier buyers at the expense of FTBs.

Furthermore, while allowing investment in residential property within pension funds is great news for brokers, it will hurt FTBs. Notwithstanding the investment limit of 50 per cent of scheme assets, this proposal was the best Christmas present ever for landlord investors, who will now hold on to such assets in the search of meaningful tax mitigations to the detriment of market liquidity.

It gets worse. The Barker report and subsequent surveys detail a chronic undersupply of new stock to the extent that by 2025 there is an expectation that the South-east alone will be suffering a shortfall of 500,000 units. Let us put that in context – it is the population of Buckinghamshire or East Sussex.

Housebuilders have some vindication in citing appalling co-operation from planning departments but that does not excuse the fact that a third of new homes in London have an average price of £245,000.

All the above will restrict supply further and may drive prices higher at a time when the Government&#39s thoughts are turning to the procurement of votes.

Lenders&#39 responses have been mixed. Despite all the hullabaloo, self-cert has been kind to FTBs so it is especially disappointing to see some self-cert lenders closing their doors to them. That said, some lenders have tried to conjure solutions to the problem, with Bank Of Ireland&#39s First Start mortgage and Woolwich&#39s parental offset products rightly securing them plaudits.

The only meaningful measure which can help is regrettably the Treasury&#39s sacred cow – stamp duty. If the Government is serious about home ownership for all, stamp duty must be abolished for FTBs under, say, £150,000. This would reduce the Treasury&#39s income by £700m a year – £100m less than the cost of the Millennium Dome and just 3 per cent of this year&#39s defence budget. There would be an initial spike in values but thereafter we would see a stabilising market where increased liquidity would actually subdue prices.

I am afraid I will be marrying Britney Spears on Mars with The Beagle as our witness before the Government understands that FTBs are an endangered species.

Kevin Duffy is managing director at Hamptons International Mortgages


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