As the Council of Mortgage Lenders (CML) said: “The forthcoming Budget represents an opportunity for the government to implement a small number of measures to underpin the housing market and help vulnerable households who fall behind with their mortgage payments.
“Over the last year or so, we have seen a range of initiatives by the government and other authorities to try to improve the stability of the financial system, maintain lending activity and limit some of the damaging consequences for business and individuals. It is still not possible to evaluate the impact of all this activity – including fiscal and monetary easing on a huge scale – so we do not believe that it is appropriate to petition the government with a long "wish list" of further policy proposals in the forthcoming Budget.
“We have therefore focused our submission to the Treasury for the forthcoming Budget on three key areas:
• extending and simplifying low-cost home-ownership to provide more help for first-time buyers, the building industry and the wider economy;
• raising the threshold for stamp duty – and removing higher rates of duty – pending a fundamental review of this tax; and
• expanding the availability of both income support for mortgage interest (ISMI) and mortgage rescue to support the wide range of ways in which lenders are already extending forbearance to try to ensure that financially-stretched borrowers can stay in their homes.
As far as low cost homeownership is concerned, the CML wants the government to:
• expand low-cost home-ownership, particularly Homebuy Direct, to increase potential lending volumes and provide more long-term funding commitments;
• simplify and reduce the number of schemes;
• reform existing shared ownership schemes to encourage lenders to participate, and move progressively from shared ownership and towards shared equity models; and
• discourage local authorities from imposing restrictions on the occupation of low-cost homes, which deter lenders from participating.
It also believes the government should scrap all higher stamp duty bands and raise the threshold for the 1% band to £250,000, pending a fundamental review of a tax “that creates distortion and inefficiency”.
The final part of its Budget submission calls for better state support for borrowers in difficulty through wider access to ISMI and mortgage rescue: “We acknowledge that, since the beginning of this year, the government has made ISMI more widely available for households that lose all their income. We welcome this improvement, but it will only provide modest, short-term help for a small number of customers. It is nowhere near ambitious enough to have a significant impact on the levels of possession we might see in a deep recession.
“We would like to see more widespread availability of mortgage rescue, particularly the option for households to convert their mortgage payments to rent. Unfortunately, local authorities are already finding that households that would otherwise qualify for the scheme are ineligible because they are in negative equity. Extending the scheme to include negative equity cases would, we believe, be a quick win for a government wanting to help the most vulnerable households.
“In our view, eligibility for ISMI should be based on individual – not household – entitlement. This would help households where the fundamental problem is a loss of income, rather than a lack of advice or forbearance.
“We also believe that ISMI should be paid at the rate charged on the mortgage, not at a standard rate. This would ensure that borrowers paying higher sub-prime or standard variable rates are helped to the same extent as other customers.”
