Yesterday, the government announced several changes designed to help the UK property market. They were careful not to say this as such, and the nearest the Prime Minister would come, was to say they were aiming to keep the housing market ‘moving forward’.
It is certainly true that the housing market this year has struggled, however, experts seem to believe that house prices have not much further to fall. The government’s plans are predominantly temporary, and as such will not be incorporated into CeMAP training courses, and even those that are permanent will only be incorporated when the syllabus is updated, which is only done once, and occasionally twice, per year. However, whether you intend to train as a mortgage advisor or are simply looking into CeMAP to help with your landlord ambitions or perhaps for personal reasons, it is always worth keeping up to date.
The headline change is of course the change to stamp duty. The government has raised the level of the 1% stamp duty tax band so that it now only applies to house prices of £175,000 or more, although this is a temporary offer for one year only. This will save a lot of money and help people in buying a house as that is one lump sum they will not have to find.
The government is also helping to avoid repossessions, when that repossession is in line because a person could not pay their mortgage due to unemployment, illness or other such factors.
This area has attracted substantial help from the government, so those on job seekers allowance (JSA) or income support can now receive assistance to repay the interest section of their mortgage repayment from as early as 13 weeks, as opposed to the original level of 39 weeks, and can be paid on mortgage values up to £175,000 now as opposed to the original value of just £100,000. This is known as Income Support for Mortgage Interest and these changes will reportedly prevent around 10,000 people from having their properties repossessed over the next two years according to the Department for Work and Pensions (DWP), at a cost of approximately £100 million. This assistance is limited to two years if the claimant is on JSA, as they should be able to find a job within that period. As a mortgage advisor, this is the sort of thing past clients will call to ask so you should stay up to date with this sort of detail, after all, you want the clients business when they recover from their problems.
There is also a new mortgage rescue scheme being put in place to help head off another 6,000 repossessions. Where families are unable to meet their mortgage repayments, they will be able to ask their local council for assistance in one of three ways: the council can buy a share of the home, a housing association can buy the home and rent it back to the family or the council can lend the family the arrears money. This scheme will cost the government an estimated £200 million.
Due to the huge rise in the number of empty city centre apartments, there are many housebuilders and developers who face bankruptcy due to a lack of sales, and so the government is putting up around £300 million as five year interest free loans to help uplift sales. These loans are available to first time buyers, with a salary of less than £60,000 per year, to help them give a 30 percent deposit on an apartment or flat. This scheme is called HomeBuy Direct, estimated to help around 10,000 people, although just being accepted for HomeBuy Direct will of course not guarantee that a bank or building society will accept the applicant for a mortgage.
“We are giving a leg-up to first-time buyers keen to own a place of their own,” said the housing minister Caroline Flint. “Not only will this help first time buyers, but it will also support the industry by identifying buyers for their new homes.”
Will it help?
Certainly, in terms of repossessions it looks to be some help, as a repossession will not look good on anybody’s credit history. The number of people that will be affected by the stamp duty changes is noticeable without being huge.
However, the issue for many people at the moment is raising a deposit. In the past, lenders have usually asked for a standard 5 per cent deposit, yet now they are asking for anything from 10 – 20 per cent as the lenders tighten their lending criteria.
It will be interesting to see the effect of these changes, and of course, how many stay permanent and make it into the CeMAP syllabus.