The government is undoubtedly aware it needs to look as though it cares very much about voters’ aspirations to own their own home, but it’s going to be virtually impossible to provide financial support to the housing and mortgage markets.
There’s just no money. And as a result most pundits think this will be a Budget that closes loopholes and restates initiatives we’ve already heard about in the housing and mortgage sectors.
We know that we’re waving goodbye to the stamp duty holiday exempting first-time buyers from paying the tax if their home is under £250,000. Although industry pundits bemoaned the government’s decision to scrap this initiative, being honest it failed to help many people.
While it sounds like a big whack off the capital first-time buyers need to amass to buy, in practice it will only make a real difference for those wanting to own property in London or the South East where prices are high enough for it to matter.
And if the government raises the income tax threshold to £10,000 as it’s promised to do by the next election, experts say this could boost people at the lower income end of the scale more meaningfully than the stamp duty holiday has done. The reasoning is those on lower salaries are typically those struggling to buy first-time and they’ll end up with more money in their pockets. In theory.
Changes expected to wider taxes and benefits might scupper that intention however with the Institute for Fiscal Studies saying median household income has fallen by an estimated 6.4% in real terms over the past two financial years. Real median income is projected to fall by 0.6% in 2012-13, to stay roughly flat in 2013-14 and finally to return to positive growth from 2014-15.
At the other end of the scale there’s the 50p tax for those earning over £150,000 as well as those in the know expecting a crackdown on various stamp duty avoidance loopholes. That includes the use of off shore trusts and special purpose vehicles to purchase UK property – something that should hit predominantly the wealthy but also commercial property investors.
Experts are concerned this might not be addressed with enough discrimination, leaving smaller commercial investors disadvantaged because of crackdown intended to stop the wealthy dodging their fair share of stamp duty.
And there’s also the prospect of a mansion tax on homes over £2m – something which many say would hit asset rich income poor families in London and the South East hardest.
Meanwhile the NewBuy scheme details were revealed yesterday with Santander, Barclays, Nationwide and NatWest all announcing they’re signed up. And while there hasn’t been a lot of information on the Right to Buy scheme, the government has said it’s offering council tenants up to £75,000 off their property if they want to purchase.
For the most part these initiatives have been welcomed but it is unlikely they’ll be joined by much more targeted help for the mortgage market in Osborne’s speech next week. Instead the government is likely to keep its focus on boosting growth and business with tax cuts.
Sadly, it may not be the Budget we’re looking for to boost growth in the mortgage market.
