Two notable features in this years thin budget from a property and mortgage perspective. First the focus on this area in the Chancellor's speech was a long overdue recognition of its importance to the wealth and personal disposable income of private individuals. Second was the dawning that stability in mortgage payments from proper fixed rates is an important ingredient in ensuring the long term stability of consumer demand and thus the economy itself. So the review by Professor David Miles into the poor take up of such products is to be welcomed. However he has not, in contrast to other areas, been asked to identify options for Government action. Our mortgage market has become one of the world's most sophisticated yet we are unable to provide long term fixed finance with the flexibility so endorsed by the Chancellor simply because the Sterling Bond market will not accept early repayment risk. The Government could at minimal cost commence a private securitisation vehicle to help solve the problem, much in the way that Fannie-Mae was created to provide mortgages for the unmortgagable in the US by providing Government Guarantees. So don't expect the market for Fixed rates to change fast overnight. Speeding up the planning regime, the largest single block to new build supply, according to most house builders, is welcome as is the removal of the double exposure to CGT currently suffered under Islamic mortgages. Both moves will improve access and volumes in the mortgage market.
Although the much heralded increase in Stamp Duty rates on residential property did not happen the sustained failure to index the thresholds continues to improve the marginal tax take as inflation does the tax collectors job.
Property investment as a class is a winner and loser. Brown's obsession with the Stamp Duty anti avoidance measures on commercial property is now coming into effect. The full impact of this transactional tax on property funds could be to lower returns by up to 1% on actively managed funds. At a time when many investors and individuals are attracted to this class why should it be so disadvantaged compared to equities. A small glimmer of hope for smaller unit funds lies in the raising of the threshold for Stamp Duty on commercial to £150,000.
Finally for the investor in the social housing element of buy to let the simplification of Housing Benefit should both improve demand and simplify rental collection in this sector.
All in all not a budget for property and mortgages but at least one which recognises their importance.