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BUDGET 2009: Industry reaction

Today’s Budget was set against a backdrop of rising unemployment and the worst recession since World War II, but chancellor Alistair Darling is no Winston Churchill and his Budget did little to inspire the nation.

But as he points out, there are no quick fixes to the current economic mess, so any possible remedies he suggested were always going to mean feeding time for the wolves.

With regard to the mortgage and housing markets, Darling seemed to rehash a lot of what he has already said, perhaps a signal that he was not confident his new measures would be enough to satisfy the appetite of the masses.

But with an election around the corner there was hope of at least a few false promises and crowd pleasers, but alas there was no fancy wrapping to this Budget, and we were left with a no-frills version.

Michael Coogan. director-general of the Council of Mortgage Lenders, says the most important element of this Budget for the mortgage market over the long term may prove to be the new asset-backed securities guarantee scheme that Darling confirmed the government will be embracing.

“This potentially offers an opportunity to restart the capital market funding for mortgages that will be a crucial factor in delivering an adequate supply of mortgage credit,” he says.

The government’s failure to scrap Stamp Duty altogether and instead just extend the £175,000 payment holiday until the end of the year is being seen as a missed opportunity. But even if it did scrap the tax it is still hard to see how this would be enough to tempt more people into the housing market.

Adrian Coles, director-general of the Building Societies Association, expects the payment holiday could benefit a number of first-time buyers, but will not boost the housing market substantially.

He urges the government to take this a step further by researching how the Stamp Duty system could be reformed to reduce the distortions from the current ‘slab’ structure of the tax that results in the bunching of transactions at prices just below the thresholds for different rates.

Coogan says although today’s Budget measures will have little short-term impact on the housing and mortgage markets, they do at least remove some of the uncertainties associated with the potential impact of withdrawing Stamp Duty and Income Support for Mortgage Interest concessions too early, and provide some relief to the new-build housing market.

The government will be maintaining the standard rate of 6.08% at which ISMI is being paid for a further six months.

Other measures by Darling include the launch a £20m scheme for local authorities to provide loans to families at risk of homelessness, as well as an £80m extension to the Homebuy Direct scheme.

The criteria for the mortgage rescue scheme was also expanded so that negative equity cases are not automatically disallowed.

The National Association of Estate Agents has damned Darling’s second Budget as a “water pistol to put out a fire”.

But when the bank is empty there is little spending to be done and if Darling did have anything up his sleeve to save the mortgage market he probably would have put us out of our misery and announced it before now.

Darling’s Budget will not go down in history as the saviour of the recession, but over time will hopefully lay the foundations for a more stable economy to build on.


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