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Threshold on hold

Guy Anker reports on a Budget that let down the mortgage industry.

What was left out of last week’s Budget was more significant to the mortgage market than the little that was in in it.

Gordon Brown’s final Budget as Chancellor saw the Prime Minister-in-waiting simply confirm a number of measures we already knew about or ask the industry to help solve the first-time buyer crisis without doing anything to help FTBs.

Brown confirmed that all zero-carbon new homes worth up to 500,000 will be exempt from stamp duty from October and the exemption will apply until September 30, 2012. This adds the detail to the commitment originally set out in December’s pre-Budget report to exempt zero-carbon homes from stamp duty.

Homes costing more than 500,000 will get a reduction in their stamp duty bill of 15,000.

The Government is also launching the first stage of a consultation inviting providers to submit ideas to develop affordable shared-equity products for FTBs.

It wants lenders and other stakeholders to suggest ideas to increase the level of shared-equity schemes and home ownership.

Mortgageforce managing director Rob Clifford says: “The changes will do nothing to help FTBs to get on to the housing ladder as rising house prices outstrip annual pay awards and more people are caught by stamp duty.”

The central issue of concern is the 125,000 stamp duty threshold which has stayed unchanged as well the higher 250,000 and 500,000 bands, which many also wanted raising.

The lack of concessions to help struggling FTBs has led to criticism from website FirstRungNow. Its managing director Helen Adams says: “There was not much specifically for first-time buyers. Removing stamp duty from zero-carbon homes is worthy and welcome but at the moment the number of these homes is very low which is something for housebuilders and sellers to work on.”

The Treasury admitted after last year’s pre-Budget report there were only “two dozen” zero-carbon homes in the UK at present.

Adams adds: “Overall, I am rather disappointed on behalf of first-time buyers. We have been campaigning for some time now that FTBs should be exempt from stamp duty as it is inhibiting their ability to take their first step towards buying a first home. We have recently placed a petition on our site and already almost 1,000 people have signed up.”

Lenders have also waded into the debate over the failure to raise stamp duty thresholds despite concessions on other taxes, such as the increase in the inheritance tax threshold from 285,000 to 350,000 from 2010.

Nationwide executive director Stuart Bernau says: “Nationwide welcomes the stamp duty concession for carbon-neutral homes and we feel it is important to do more to help hard-pressed homebuyers.

“We have calculated that if the stamp duty threshold had been raised in line with house price inflation since 1993, it would now stand at 206,000 and we are disappointed that the Chancellor has decided not to increase the level where the 1 per cent charge kicks in.”

Halifax group economist Tim Crawford adds: “We welcome the increase in the inheritance tax threshold but we would have liked to have seen the thresholds for both inheritance tax and stamp duty adjusted to reflect the significant increase in house prices in the past decade.”

There were some positive comments as the Building Societies Association welcomed the commitment to using the mortgage industry to help the environment.

BSA director-general Adrian Coles says: “The measures proposed to increase energy efficiency of homes, targeted at pensioners and low-income families, are a welcome first step. Given the impact of carbon emissions from households on the environ-ment we look forward to a dialogue on how to encour-age existing property owners to improve the environ-mental performance of their homes. This would ensure a real step-change in combating climate change.”

Within hours of the Chancellors’s plea to banks and building societies to launch more green mortgage products, HBOS confirmed it is planning to launch green mortgages next year while Abbey has committed to providing green personal loans.

Another potential plus was a tax move which will help overseas mortgage brokers as company directors owning overseas property bought through their firm for personal use will now not face a benefit-in-kind charge.

Syndaxi Financial Planning managing director Robert Reid says: “This removes a problem which arose from the need to hold overseas property in a company as a result of likely tax and property ownership rules. It is good news for the industry.”

But there was also a potential sting in the tail for one-person-band mortgage advisers. The Chancellor increased the small companies’ rate of corporation tax will increase from 19 per cent to 20 per cent in the next tax year and to 22 per cent by 2009/10.

With the basic rate of income tax to fall from 22 to 20 per cent in 2008/09, incorporated businesses may eventually pay more on their retained profits than unincorporated traders who are self-employed pay on their earnings. Mortgages


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