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«The chancellor announces new measures to support the housing market.
In his 2009 Budget, the Chancellor of the Exchequer, Alistair Darling, announced an extension to the current stamp duty holiday for residential properties and introduced guarantees on new mortgage-backed assets. These measures will help the UK housing market to some extent, but the question remains of whether they will be enough to get it out of its current predicament.
The 2009 Budget contained a raft of measures aimed at kick-starting the country's beleaguered economy. One of the key proposals for the housing market was the extension of the stamp duty holiday for properties worth up to GBP175,000 to the end of the calendar year. In addition, the chancellor announced that the government would guarantee over GBP50 billion of triple-A related residential mortgage-backed securities, on condition that the mortgages supporting the bonds were not issued before 2008 and have a maximum weighted average loan-to-value of 75%. In addition, Darling announced that the large UK banks would increase mortgage availability by around GBP20 billion, although he was unclear on the specific details.
With house prices having fallen significantly over the last 18 months, the percentage of properties covered by the stamp duty holiday is now estimated to be around 60% of the market. Setting a deadline for the end of the exemption period may encourage those who wereat the point of jumping onto the property ladder to hasten their actions. However, some observers argue that stamp duty should be scrapped entirely for an unspecified period in order to avoid the complications that can arise if it pushes the borrower into a higher loan-to-value mortgage band, as the terms available to them will become less favorable.
Roderick Logan, financial services analyst at Datamonitor, says: “The stamp duty move alone cannot provide the stimulus that the sector requires for new lending to take off.” A key factor hindering the mortgage market is the unwillingness of lenders to lend. The proposed scheme to guarantee new mortgage-backed assets will go some way towards tackling this by serving to increase liquidity in the market. Logan reckons: “Through the underwriting of mortgage lending, the government should boost the availability of new mortgages, as banks are currently chiefly focusing on using deposits to fund all new lending due to the collapse of the wholesale markets.”
The proposals represent a much-needed fillip for the UK housing market. However, first-time buyers drive the housing market and generally desire mortgages with high loan-to-values, as they are less likely to be able to put down a large deposit. As such, more needs to be done to help those without substantial savings to gain access to mortgage deals with less prohibitive rates» (Fonte: Datamonitor).
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