Housing rescue package is too little, too late

Recent announcements by the government aimed at providing support to the housing market have understandably received a mixed response.

Its mortgage rescue scheme, while being well intended and likely to benefit up to 6,000 borrowers in difficulties, is unlikely to have a material impact on an increasingly large number of borrowers in arrears, many of whom will unfortunately end up repossessed.

Half-yearly figures from the Council of Mortgage Lenders reported 18,900 properties repossessed in the first six months of 2008, and although significantly up on 2007 this is broadly in line with its forecast for the year.

Last year the CML said it 45,000 this year and it is sticking to this forecast.

For the 6,000 borrowers who will get help this is good news but the assistance will reach only around 13% of the total number of repossessions this year.

Interestingly, the 6,000 figure represents almost exactly the rise in repossession numbers in the first six months of 2007 (12,800) compared with the corresponding period in 2008 (18,900).

With the level of mortgages more than three months in arrears starting to increase, it is likely that in 2009 repossessions will rise above 2008 levels, particularly as the economy is heading towards recession. With unemployment creeping up, the number of potential arrears and repossessions could spiral.

A further change is the Department for Work and Pensions announcement of measures to help vulnerable home owners meet their mortgage interest payments.

The DWP will be reforming Income Support for Mortgage Interest by shortening the waiting period before ISMI is paid from 39 weeks to 13 weeks for new working age claims from April 2009.

The capital limit for new working age claims will also be increased to 175,000 from April 2009.

While this is good news, April 2009 is still almost seven months down the line and many hard-pressed borrowers may end up surrendering their homes in the intervening period.

Another strand in the announcements was the initiative to provide support through a 300m scheme which will help up to 10,000 first-time buyers into affordable home ownership over the next two years.

Those who will benefit will welcome this, but to claim that this will help the building industry to weather the storm is farcical.

The government’s own target is to build three million new homes by 2020. To achieve this we would need to build around 250,000 homes every year for the next 12 years.

This year’s new home constructions will be dramatically down on recent years and even if 150,000 new homes are built, 10,000 represents just 6% of the total. This is hardly likely to help the many thousands of builders who have been laid off.

As with much from our government, every initiative is portrayed as the panacea to address all ills. While it would be churlish to say the help is not welcome, the latest round of announcements in relation to the housing industry are only likely to benefit around 30,000 borrowers or buyers directly.