News: Weekly News Round Up - Budget Recieves Cautious Welcome From Lenders

Fri, 24 Apr 09

Mortgage lenders have given a cautious welcome to measures in this week’s budget to shore up the flagging housing market.

Measures include an extension of the stamp duty holiday on properties sold for less than £175,000 until the end of the year, a guarentee mortgage backed securities scheme and

extending the criteria for mortgage rescue schemes being delivered by local councils so that negative equity cases are not automatically precluded.

A new £20 million scheme for local authorities to provide loans to families at risk of homelessness was also announced, as was a £80 million extension to the Homebuy Direct shared equity scheme.

The measures, which also include £500m of extra support for the housing industry and £100m to local authorities to build energy-efficient housing, amount to some £1bn for the housing market.

However Council of Mortgage Lenders has said that while, “helpful”, the measures are “unlikely to make much of an impact overall on the housing market.

CML director general Michael Coogan said: "The most important element of this Budget for the mortgage market over the long term may prove to be the new asset backed securities guarantee scheme. This potentially offers an opportunity to restart the capital market funding for mortgages that will be a crucial factor in delivering an adequate supply of mortgage credit.

 "Although today's Budget measures will have little short-term impact on the housing and mortgage markets, they do at least remove some of the uncertainties associated with the potential impact of withdrawing stamp duty.

"The Chancellor had little room to make substantive interventions, so there are no real surprises in this list. The measures overall are unlikely to significantly improve prospects for higher market activity in the coming months."

Meanwhile this week saw the launch of the Homeowners Mortgage Support Scheme, which allows homeowners in financial difficult to defer up to 70% of their mortgage interest payments.

Housing Minister, Margaret Beckett told the BBC that, “the idea of this is to try and help people who haven't lost everything, and who aren't going to be eligible, to be re-housed under homelessness legislation, but who nevertheless are having difficulties.”

 To qualify, applicants will need to have some income and be able to repay at least 30% of their interest payments; have a mortgage of less than £400,000; and have savings of less than £16,000.

Among those lenders taking part are Lloyds Banking Group, Northern Rock, Royal Bank of Scotland, Bradford & Bingley and the National Australia bank group, which includes the Clydesdale and the Yorkshire banks.

The Bank of Ireland, GMAC, GE Money, Kensington, the Post Office and Standard Life bank, also plan to take part.

 The scheme has been criticised by among others the CML and the Building Societies Association (BSA), for having too strict a criteria and for being too confusing for homeowners.

Also a number of building societies, including the Nationwide, are not taking part. Instead they have pledged to offer a similar level of support to their customers separately.

"Customers experiencing a reduction in income and willing to make regular monthly repayments will receive a similar, if not greater, level of forbearance to that provided under the HMSS," said Paul Broadhead, the BSA’s head of mortgage policy.

This week the CML urged homeowners looking for green shoots of recovery not to get too carried away by their latest figures for mortgage lending and the Government’s figures for home sales.

HM Revenue & Customs (HMRC) showed that the number of homes sold rose by 40% last month, however this is still 28% down on March 2008’s figures - see Home News 23 Apr 2000.

Similarly the CML’s gross mortgage lending in March was up 16% on February’s figure. However this is still less than half the amount lent in March 2008, and the CML’s lending figures for the first three months of 2009 are the lowest quarterly results for eight years.

Coogan dismissed both rises as a seasonal blip, with the warmer weather generating greater activity in the market, rather than being an indicator that the market has levelled out.  

"What we said at the beginning of the year was that we expected over the course of 2009, £145bn to be lent, and we are on track with that forecast, and that has to be compared with £363bn in 2007," Coogan added.


By Joe Lepper


See also: Home Asking Price Index, House Prices and Trends by Town and Postcode,Mortgages

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