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Budget 2013: The birth of a British Fannie Mae?

Well the chancellor seems to have done well in achieving a balance with limited resources available, although I am sure a careful reading of the detail will reveal if this impression is correct or not.

Tony Ward MS blog

Certainly it seems there is little room to manoeuvre given the deficit.

Forecasts of increasing debt to GDP ratios from a current 75.9 per cent to the mid 85 per cent range by 2015 isn’t encouraging.

And with the Office of Budget Responsibility predicting reductions in both domestic and Eurozone GDP I think the chancellor recognised that while he can’t throw his deficit reduction strategy out of the window he must do something to address the lack of economic growth.

So it was interesting to see these initiatives mentioned: The Funding for Lending Scheme is due to end for drawings in January 2014 but it looks as though there may be extensions to this and also perhaps there maybe some targeting of the scheme to key risk areas such as SMEs and first time buyers.

That said, it will be interesting to see how this will be achieved without offending the Eurocrats and the State Aid Rules.

Then there is the question of non-banks lenders and will they be allowed into a modified FLS?

In truth, non-bank lenders are a small proportion of the market today but it is just possible that by allowing them in they may have a disproportionate impact on key areas.

Much lobbying has been done to include them so we need to wait and see. I’m not surprised that the detail wasn’t mentioned today. Furious work will be going on behind the scenes as we speak.

Of perhaps more significance to the mortgage industry will be the two schemes launched under the Help to Buy banner.

The first is effectively an extension of the FirstBuy shared equity scheme aimed at all rather than just first time buyers.

It looks like the Government is picking up the tab for all of this lending rather than sharing it with house builders but detailed information is scarce as I write this.

The second is the modification of the NewBuy scheme to give us our first Fannie Mae type of scheme whereby the Government is prepared to provide a guarantee for mortgage loans up to 95 per cent.

Importantly this applies to new loans, remortgages and second hand properties as well as new build.

This is potential a game changing scheme providing the banks can get capital relief from the regulator.

Is it a coincidence that this looks almost Canadian in its structure I wonder?

The chancellor couldn’t resist having a go at the banks: the Libor fines being directed to the military should be a popular move and from a PR perspective is a mark of genius.

The levy on banks will be increased for a sixth time to ensure lenders don’t benefit from a cut in corporation tax. Outside of the banking markets who will complain about this?

No change to deficit reduction focus and an attempt to stimulate growth in SMEs and the housing market make this a positive budget in my view. Time will tell. Now we just have to wait and see whether Standard and Poor’s and Fitch Ratings agree with me.

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  • mortgage man 23rd March 2013 at 11:27 am

    Ok so the goverment is trying to get lending moving, that’s great we all want that. The Issue is when my network who will insist on numerious documents of verification to support the clients loan, which the lender doesn’t even wish to see. Botton line the regulator has to also loosen its belt if us brokers are to get a slice of the action.

  • FCF 23rd March 2013 at 10:40 am

    It’s bad news. Government shouldn’t get involved guaranteeing banks, always ends in tears. Reduce stamp duty.

  • Hugh Wade-Jones 20th March 2013 at 4:58 pm

    The UK is one of the only developed property markets in the world where the government hasn’t underpinned lending in some form so not surprised at this move. On one hand its good because it will hopefully grease the wheels of lending on the other hand the short term products (1-3yr trackers and fixed rates) off the back of the banks need to deliver fast results to shareholders may be replaced by longer term 5, 10 even 20 year products so less quick re-mortgage business. Personally I don’t see the governments obsession with trying to drive continually higher LTV’s, having to put a decent bit (15%+) of skin into the deal seems like a fair trade if you’re buying a house.

  • John Constable 20th March 2013 at 4:10 pm

    So, fines can be hypothecated but taxes (generally speaking) cannot.

    Because, politicians can, in this case, use the fines to boost their standing but taxes must go into the ‘pot’ so that they can be spent by the politicians on their pet pork-barrel projects.

    PS. Fannie (and Freddie) came to a sticky end in the USA.