ortgage borrowers tax tinkering help or hinder the mortgage market?
In a world obsessed with social media, news is considerably quicker to reach the public. There was an anti-climax to this Budget with most of the main headliners having been leaked weeks before. How it will affect the mortgage market is pretty simple really, in that it won’t. My opinion is that the increase on stamp duty on properties above £2m will have a nominal impact on what is a growing international market. Properties above £2m, certainly in the London market, commonly attract international investors as a safety net for their money. In the last six to 12 months, the lack of stock circulating at this level is clear, meaning properties that are coming on are going quickly and often over the purchase price, showing that purchasers are not frightened of paying over the odds.
The “hassle” of finding that extra 2% will merely inconvenience purchasers rather than put them off. This was quickly followed by the declaration that stamp duty mitigation schemes and tax avoidance will be tightened up on but on the last stamp duty increase and the same announcement concerning tax avoidance, all it seemed to do was create more awareness of such schemes. With only 1% of all purchase approvals being over £2m in 2011, the jump to 7% stamp duty really won’t be felt much at all. What perhaps may need assistance in the mortgage market is some help in slightly more aggressive lending in the new build sector. This received a big boost in the NewBuy Scheme and the boost in the Budget of an extra £150m to Get Britain Building again to further enhance the £400m already pledged. An adjustment in criteria over new build restrictions could see this form a bigger part of the mortgage industry moving forward.
All in all a major chance to review, adjust and reform stamp duty was again missed and so another Budget goes by where really, the impact on the property and mortgage industry will remain largely unfelt.
Lea Karasavvas, managing director, Prolific Mortgage Finance
With home ownership higher in the UK than our European neighbours, maybe the mortgage market was a small concern for the Chancellor; and there was certainly no strategy in place to boost it in the short term. The key to return a more “normal” level of £220bn
requires affordable interest rates, consumer confidence including house price stability, and stable disposable incomes.
Whilst the Bank base rate is now viewed as unlikely to change, SVRs are increasing due to wholesale funding cost increases, which makes consumers nervous to remortgage. First-time buyers have returned to the market briefly, but with the stamp duty exemption now finished, this brief flurry is likely to disappear. At the other end of the market the 7% stamp duty on properties over £2m is mainly going to impact private buyers in prime London locations. This change could have a negative impact on the market
where it acts as a disincentive at the top end of the chain, which may have repercussions lower down the price scale. The NewBuy scheme will help house builders but how much this will impact is hard to predict, however it is a welcome boost as is the right to buy discount increase. Finally, stable disposable incomes are also key to the mortgage market. There are groups of consumers who are not feeling the squeeze, typically those who are over 40, in professional jobs with low overall levels of debt. Overall consumer confidence is low with unemployment set to continue to rise until 2013 and petrol prices hitting new highs, all of which hurt disposable incomes. So overall my verdict would be an opportunity missed. I would have liked to have seen an extension to the first- time buyer stamp duty exemption; some joined-up thinking around bank funding (the government appears to want banks to lend more, hold more reserves, be more prudent, be more profitable and pay a levy); and an extension of help to social housing groups that often bridge the gap between renting and buying.
Dev Malle, sales and marketing director, Personal Touch
ense. Do you want to be a part of the next Bigger Issue? Email
sarah@mortgageintroducer.com www.mortgageintroducer.com MORTGAGE INTRODUCER APRIL 2012 27
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