Housing market faces fresh dip without government aid

Published on Friday 27 November 2009 19:45

THE housing market could nosedive into a fresh crisis unless the government uses next month's Pre-Budget Report to support the fragile recovery.

That is the warning today from estate agents and mortgage intermediaries, who claim urgent steps are needed to increase competition in the mortgage market and lower the barriers facing first-time buyers.

In its wish list for the Chancellor's 9 December Pre-Budget Report, the National Association of Estate Agents (NAEA) calls for the temporary increase in the stamp duty threshold – by 50,000 to 175,000 – to be extended into next year. It believes the tentative housing market recovery will be throttled by the end of the stamp duty holiday on Hogmanay and the reversion of VAT to 17.5 per cent.

An extension to the stamp duty threshold should be part of a wider package aimed at first-time buyers, the NAEA added.

Peter Bolton King, NAEA chief executive, said first-time buyers were the lifeblood of the housing market but continue to suffer a lack of mortgage finance. He called on government to put pressure on lenders to provide more competitive mortgages for first-time buyers with small deposits.

"We recognise that high loan-to-value mortgages carry additional risk for the lender, so we are calling on the government to actively promote the use by lenders of mortgage indemnity guarantees or mortgage insurance on properties with a high loan-to-value ratio," said Bolton King.

But the government's actions in the housing market have so far hindered competition, claimed the Association of Mortgage Intermediaries (AMI). In its Pre-Budget Report submission, out today, it said government intervention had caused the mortgage market to contract, pointing out that six groups account for around 90 per cent of mortgages written.

Robert Sinclair, director of AMI, said: "This artificial restriction on competition has meant lenders have kept new product costs high and some groups of consumers have been punished." The government needs to use the Pre-Budget Report to ease the capital and regulatory burden on building societies and non-banking institutions to encourage them to re-enter the market, claimed Sinclair.

He added that the Chancellor could give first-time buyers a boost by increasing the incentives around shared ownership schemes.

"Tax incentives for housing associations and builders to enable them to concentrate on more shared ownership developments should be introduced."

The NAEA also called for the immediate suspension of home information packs, the England and Wales equivalent of the Scottish home reports system. But Bolton King claimed that while home reports were viewed more favourably than the system south of the Border, feedback from NAEA members suggested home reports should be reviewed.

"The time has come to take stock of home reports and ask if they are fit for purpose."