Posted: Tuesday, 9 September 2008 @ 08:51
The Government has published further details of the measures announced last week to support the housing market.
Let's take each of those proposals in turn:
Home Buy Direct - the Government's scheme to help first time buyers. That 30% loan is interest free for 5 years but from year six, a 3 per cent charge will be levied. From year ten onwards, the Bank of England Base Rate will be charged, increasing by RPI plus 0.5 per cent each year. That's a real sting in the tail. Notice even the Government doesn't think CPI is an accurate measure of inflation and has chosen to use RPI. A maximum of 10,000 first time buyers will be helped - surely a drop in the ocean?
Mortgage Rescue Scheme - here's a description of the process involved:
On referral to the local authority, household's homelessness eligibility is assessed.
If eligible, lender is alerted and Money Advisers engaged.
Unsecured debt is cleared.
Money Advisers draw up and agree with household a Debt Management Plan setting out the household's realistic affordable housing costs.
RSL or HomeBuy agency engaged.
Property is visited to ensure structurally sound.
Decision taken on suitability of sale and rentback/shared ownership or shared equity.
Deal is made with lender by RSL or Debt Adviser.
I suspect many people will fall at one or more of those hurdles. Again, the scheme will help a maximum of 6,000 homeowners, a very small percentage of those facing difficulty paying their mortgage.
SMI Reform - Support for Mortgage Interest (SMI) can be paid to people on Income Support, Pension Credit and income-based Jobseeker's Allowance if they are experiencing problems with the interest payments on their mortgage. From April 2009 the waiting period will be cut to 13 weeks for all new working age claims. In addition, as a temporary measure, also from April 2009, the capital limit on loans upon which SMI is based will be increased from £100,000 to £175,000 for new working age claims. From April 2009 there will be a time limit on SMI of two years for new Jobseeker's Allowance claims only. How many people will this actually help?
Affordable Housing Spending - the Government is bringing forward £400M from the 2010-11 budget to enable up to 5,000 new houses to be built. So this isn't new money and come 2010-11 the Government will have no provision in the budget for affordable housing.
Regeneration - Each proposal will be assessed against a set of criteria to ensure it supports our key objectives. In order to secure this funding a scheme will have to show its effect on improving outcomes for local people and communities, along with a clear rationale for intervention. We will focus on those schemes that are critical to the wider regeneration of an area, with significant multiplier effects, where delivery is time critical, and where there is demand for the finished product. RDAs will also need to be convinced that a strong business case is in place for each scheme, and that each represents good value for money. The amount of funding isn't clear and there are plenty of hurdles at which projects may fall.
Stamp Duty Land Tax - there is now no SDLT for homes up to £175,000 for twelve months. You could therefore save up to £1750 if you buy in the next twelve months. With the Halifax reporting last week that over the last six months the average home has fallen in value at an average rate of £2,900 and with the head of Nationwide predicting house prices will fall by 25% from their peak, you may be forgiven for thinking you're better off not buying at all at the moment.
Conclusion - this isn't the rescue the housing market needs. Sorting out the banking system is the key factor here. Expect Gordon Brown and Mervyn King to be at loggerheads over that one within the next few weeks.
Steve Petty, Commercial Property Lawyer
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