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Budget 2012 – what the Chancellor must deliver

by: Mortgage Solutions
  • 23/02/2012
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Budget 2012 – what the Chancellor must deliver
Chancellor George Osborne will deliver this year's Budget to the House of Commons on 21 March. What do you want out of it?

Telling us their thoughts in this week’s Market Watch are:

Robert Sinclair, director of AMI

 

Peter Curran, head of intermediary distribution at Lloyds Banking Group

 

Nigel Stockton, financial services director at Countrywide

 

 

Robert Sinclair, director of AMI

 

This year’s Budget will probably define this government. Will it stick to its tight fiscal plans and expenditure control?

For the mortgage industry, the loss of the Stamp Duty holiday is to be regretted, as we feel it was having more impact than thought by government. A further extension would be most welcome.

We have long argued for reform to Stamp Duty, but this has fallen on deaf ears.

The slab nature of this tax, which creates house price voids at the marginal rates, needs addressing. A graduated tax that is levied on the seller, not the purchaser, has to be a more sensible approach, although I am sure the building industry might not agree.

A braver move would be to abolish Stamp Duty on residential property and to remove the principal property exemption from capital gains and inheritance tax. Some see this as a potentially effective means of limiting house price growth.

However, the short-term impact on government cash flow might be too big a pill to swallow and the ballot box impact for wealthier England, too big a bill to pay.

Yet, ensuring the MIG and right-to-buy schemes are delivered is essential. These will give impetus to the construction industry and begin to restore some confidence in the market.

Many are becoming concerned about the quality of our housing stock, therefore VAT exemptions on home improvement goods or on renovating property would assist in protecting these important assets.

As many broker firms are small businesses, increases in tax thresholds and assistance for start-ups must be welcomed.

Peter Curran, head of intermediary distribution at Lloyds Banking Group

 

In the last few years, the budget has led to few sweeping reforms affecting the housing market.

Clearly, the obvious one is the introduction of the first-time buyer Stamp Duty exemption, which is due to end over the next few weeks.

It’s unlikely that we’re going to see any change to Stamp Duty when the Chancellor takes to the floor in March, but it’s arguable that it’s time to review its appropriateness in today’s market.

Halifax research shows that the higher Stamp Duty thresholds would be more than double their current level if they had risen in line with house prices.

The higher Stamp Duty thresholds – £250,000 and £500,000 – have not changed since their introduction in July 1997.

Over the same time period, we have seen a 140% increase in house prices.

This has resulted in a five-fold increase in people paying Stamp Duty at this level, which may suggest why we are unlikely to see any change any time soon.

We need to balance the importance of Stamp Duty as a revenue with the impact it has on movement in the housing market.

During the period of Stamp Duty exemption, 95% of first-time buyer purchases have been below the £250,000 threshold, which is demonstrative of the reasons that the market would support an extension.

We should keep in mind that we are still working through to the launch of the new build indemnity scheme, which is set to support the market in a way that we might otherwise have expected to come from the budget.

It will be interesting to watch the impact on the new build market in particular.

Ultimately though, the Chancellor faces a challenge in delivering a budget that will hopefully restore higher levels of confidence in the market.

Nigel Stockton, financial services director at Countrywide

 

We call on the government to adopt a two-pronged approach in next month’s budget, combining long-standing campaigns with new initiatives.

To stimulate and sustain the housing market, we strongly believe that the additional tax revenues from ceasing the first-time buyer Stamp Duty holiday are not material.

The Stamp Duty holiday provides much needed confidence for first-time buyers and reduces their upfront costs at a time when their finances are stretched to the limit, as they make the largest purchase of their life.

In addition, Stamp Duty rules should be significantly tightened for properties above £250,000.

For example, if the property is for residential use, then people should pay Stamp Duty with no allowance for limited company ownership. This additional tax would more than pay for continuing the Stamp Duty holiday and lead to an increase in Treasury revenue overall.

The government should also demand more from its banks’ shareholdings. We are surprised that the UK’s largest lenders missed their SME lending target. Lending targets should be set across the board and we would like to see the return of formal targets announced for both mortgage lending and the Mortgage Indemnity Guarantee Scheme.

After all, HSBC has announced its lending targets for mortgages – £15bn of lending, of which £3bn is for first-time buyers. Why haven’t government-owned lenders done the same?

We recognise that the equity markets may be nervous about a more active government shareholder, but we are asking that they monitor progress against agreed targets, rather than becoming involved in the detail of how the bank is managed.

Across the country demand from tenants far outstrips supply.

The government has a responsibility to help remove the barriers that are preventing institutional investment by doing more to drive buy-to-let mortgage availability, landlord/investment tax relief and development activity to ensure a sustainable private housing sector by increasing both quality and stock levels.

The government should introduce additional tax breaks for multiple tenancy units. For example, if a landlord buys a property and instructs a Local Authority or housing association (or an approved agent representing them), they should get Stamp Duty and/or tax relief on the interest accrued for any loans taken out to finance the purchase.

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