In his pre-Budget Report this week, Alistair Darling announced new proposals to help people who are struggling to pay their mortgage and those who are struggling to secure one, protecting "first-time buyer demand, and long-term housing supply" which are the "two essential cornerstones of the housing market."
The Chancellor said that the property market needs immediate action to boost economic activity, with mortgage
lending down a third since March, and mortgages still harder to secure and less affordable since the beginning of the credit crunch, forcing house prices down by 11 per cent.
Mr Darling wants to "take steps to improve the supply of mortgages, avoid repossessions, and to increase the number of new homes." he told the House of Commons. As part of the plans, he is setting up a new group – the Lending Panel – to monitor new lending and to individuals and businesses and lending practices.
And the Chancellor also recognised the plight of existing homeowners as much as potential new ones, vowing to investigate how to "help ensure that those in work but facing financial difficulties can remain in their homes."
The implementation of repossession only as a last resort was emphasised in the report, and the Chancellor said that the banks have agreed to wait three months before starting repossession proceedings if a homeowner is facing difficulties. But this has already been widely recognised by the majority of lenders for which this has been general practice for some time.
The Chancellor outlined an increase in the upper limit of the Support for Mortgage Interest scheme which covers mortgage interest payments for those who have lost their jobs while they look for a new one. The scheme will now pay out for mortgages up to £200,000, an increase from the present limit of £100,000, and the interest rate threshold will remain at six per cent, despite a 1.5 per cent cut in the base rate to three per cent this month.
As part of the £200million lifeline for struggling mortgage customers, the Chancellor is extending the Mortgage Rescue Scheme, which helps vulnerable homeowners to stay in their homes, by including those at greater risk as a result of taking out a second mortgage.
An additional £775million will also be added to the existing £700million pledged to pay for new housing and to boost the market as a whole.
Mr Darling said that the new measures will "help homeowners of today stay in their homes – and help the homeowners of tomorrow buy their first home."
But some mortgage experts think that the Chancellor could have gone a lot further in his report.
Ray Boulger from mortgage broker John Charcol said that "A big disappointment in the PBR was the failure to take advantage of this golden opportunity to at least reduce stamp duty land tax, if not temporarily abolish it." because "A complete temporary suspension would have provided a very positive stimulus to the housing market".
Commenting on the PBR, director general of the Council of Mortgage Lenders (CML
), Michael Coogan, said: "Everything announced today is helpful, if modest. But it is vital to recognise that not all lenders are the same, and not all have received support from the Government's interventions in what remains a very difficult financial and economic environment."
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