Wednesday March 12, 04:21 PM
UK BUDGET Darling says to start review on housing finance UPDATE
(Update adds government comment)
LONDON (Thomson Financial) - Chancellor of the Exchequer Alistair Darling announced the government will start a review of housing finance to increase the availability of long-term fixed rate mortgages,
in order to protect homeowners from risk.
In his first budget speech, Darling said the government would seek views for a framework to deliver fixed rate mortgages for 10, 20, or 25 years and kick-start the wholesale money markets, adding that he would report back in the pre-budget report.
Analysts expected more details on the plans, following Darling's commitment last month to a system in which mortgages would be graded according to risk, with the least risky loans given a 'gold standard' kitemark.
The chancellor said measures would aim to keep mortgages low and stable, as well as to boost secondary markets, which comprised over 30 pct of mortgages last year but were now in an 'extremely difficult' position.
Nicholas Leeming, major client director at propertyfinder.com, said the probe into the possibility of more choice in long-term fixed rate mortgage products, to be reviewed in several months time, did not help people who are struggling now. 'It is becoming increasingly difficult to gain access to financing for home purchase, and despite producing a 95 page document on the issue, the chancellor has pledged very little real help,' he said.
The chancellor also pledged more support for key workers and first-time home buyers, through the reduction of stamp duty for shared equity schemes.
He highlighted government support for shared equity schemes, which have helped around 95,000 homeowners acquire property since Labour took office, and announced that stamp duty for these schemes will be scrapped for 80 pct of the equity value as of next month.
In reaction, New Homes Marketing Board chairman and former Barratt chief executive David Pretty, told Thomson Financial News that this measure would benefit a very limited number of housebuyers, in contrast to a raise in stamp duty threshold for everyone.
'With this neutral Budget, the government has lost an opportunity to raise what has become an unfair tax,' he said. 'Stamp duty should go up from the current 125,000 stg to around 250,000 stg, as the figure has been so eroded by houseprice inflation.'
He noted that the measure would diminish tax revenues, but would encourage house buying in a weakening market.
Darling also said 8 bln stg would be spent over the next three years in social housing, with the aim of delivering 70,000 new homes each year.
Overall, the government reiterated its commitment to sharply increase home building - with up to 3 mln new homes by 2020. The government also said it has identified further public land sites for up to 70,000 new homes, in addition to the sites for 40,000 homes already identified following a review of public sector land.
The Budget also includes an extension of land remediation relief to assist the development of brownfield land.
'As well as considering how we increase the housing available we must also continue to think carefully about where we build,' Housing Minister Caroline Flint said today. 'The new measures to support redevelopment of existing land alongside a commitment to delivering 200,000 homes on surplus public sector land by 2016 will mean supply of housing can increase without the need to use green field sites.'
Market observers noted that most figures had been said before and just signalled that some more public land sites had been identified for new homes, yet acknowledged that the government's room for manoeuvre is limited.
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