But as the Treasury has asked lenders and commentators for input on how to kick-start the first-time buyer sector, I thought about what I’d do if I were housing minister. While it is good news that housing minister Grant Shapps has a keen focus on affordable housing, the issues effecting second home ownership should not be sidelined.
Chancellor for the day
My suggestions cost money, so won’t happen any time soon, but they offer a bit of a distraction while we worry about the euro, debt ratings and banks’ share prices.
My first decree as economic overlord of the UK would be not to over-complicate policy
My first decree as economic overlord of the UK would be not to over-complicate policy. Keep it simple, mainly because I’m a simple soul at heart but also because complex propositions are rarely fully implemented.
So I’m going to keep to providing a one-year boost to the market. I think we could all come up with some long-term reorientations but quick wins are what I’d try to achieve by the end 2012.
I’d probably kick off with three telephone calls to our nationalised and part-nationalised lenders. I would insist that they lend £500m each at 95% LTV to first-time buyers.
Lenders can keep their current scorecard as well everyone knows it is deposit not affordability that’s the main issue. The criteria would be that it must be for a house purchase and buyers should not have owned properties before.
I would also insist they lend another £500m each to the new-build sector at 90% LTV and not differentiate between flats and houses. I’d develop this scheme to run through the top 10 house builders by volume and distributed proportionally.
The usual scorecard would apply, with the government providing a guarantee for the top 5%. That would be £3bn of incremental money over and above what these banks are already committed to by December 31.
Failure to lend it in terms of completions, not applications, would mean that they had to pay a Stamp Duty-style tax of 5% on the amount unspent.
I reckon Northern Rock, the Royal Bank of Scotland and Lloyds Banking Group would easily be able to do this.
Even in this market, I think £1bn in funding is doable. It is £3bn extra or at £130bn gross lending, a 2.5% increase of lending in the second half of the year so equivalent to a 5% bolster to lending on an annual run rate. It would be a start if nothing else. Next, the core market
I did consider mortgage interest relief at source but realised that it would take about four years to implement on the systems front so that is no good.
Instead, I plumped for Stamp Duty. This is raising half the expected amount, with house purchase transactions at 550,000 versus the 1.25 million long-term average.
So why not halve it on all properties for the whole of 2012?
It costs far less than you think and would provide a boost to all walks of life. I’d also make it compulsory without exception, even for corporates, so it might not be a big hit after all.
Getting a grip on the private rental market
Lack of rental property is a huge issue so I’d increase tax breaks for those who buy new properties for buy-to-let purposes.
I’d do this by saying that if they buy a property and rent it to a housing association or local authority, they could apply to pay no Stamp Duty at all in 2012.
For others in the private sector, I’d allow the first year’s rent for all new rental property to be added to the interest paid and allow this to be offset against tax.
These measures do not cost much individually, but together they would give the housing market the push it needs.
Then all we would need to worry about was 2013 as I’ll have probably been accused of creating a small housing bubble.
Happy Birthday to you…
Happy 10th Birthday Mortgage Strategy.
From 2001 telephone conversations between Michael Bolton and Patrick Ponsford to the only remaining weekly mortgage trade magazine.
We would miss you if you weren’t here.