Drastic stamp duty measures that were introduced two months ago as the Government attempted to boost the mortgage market have failed to stimulate the market, new figures from the Council of Mortgage Lenders (CML) have revealed.
The stamp duty relief was aimed at aiding struggling potential buyers by increasing the stamp duty
threshold from £125,000 to £175,000 for one year. It was hoped that this would help first time buyers and those who need the help most.
However, since its introduction in early September, the number of new home loans has fallen by 15 per cent between August and September. The total number of mortgages
in September 2008 was 34,900, 57 per cent less than the 80,400 there were in September 2007.
And, the CML figures show that despite a dramatic fall in house prices, first time buyers continue to struggle. In fact, the number of first time buyer mortgages
is down 52 per cent between September 2007 and September 2008.
However, the average amount borrowed has also fallen, offering a glimmer of hope for the mortgage market. According to the figures, first time buyers borrowed an average of £104,500, down from £108,000 in August. Commenting on the statistics, CML director, Michael Coogan, said:
"While house purchase activity has reached exceptionally low levels, it is encouraging to see that transaction costs lowered for a larger proportion of borrowers. The Government should consider what other measures can be brought forward to enable the market to transact more easily."
Commenting on how lenders are affected, he added: "Banks and building societies do want to support homeowners, but they have limited funds available and are, quite reasonably, taking a prudent approach to risk. If the pricing and volume of interbank lending continues to improve, this should help the flow of mortgage lending."
On a positive note, the Royal Institution of Chartered Surveyors (RICS) believes that the mortgage market may have reached its bottom as new buyer enquiries have seen a boost in October. RICS' chief economist, Simon Rubinsohn said:
"It is not unreasonable to conclude that transaction levels are now pretty close to the floor. Nevertheless, prices are likely to continue to weaken for some time to come with rising unemployment increasing distress selling and in the process raising the inventory overhang of unsold properties."
© Fair Investment Company Ltd