Virgin Money cuts resi and BTL rates
Rob Clifford is chief executive of Stonebridge
Before I write further about the Budget, there’s little doubt that the measures announced earlier this month should be viewed positively in terms of what they bring to the mortgage and housing market.
A stamp duty holiday extension was, and is, necessary, as is the decision to resurrect the high LTV guarantee scheme, in order to encourage lenders to offer more products at those 90%-plus levels, with or without the Government guarantee.
Virgin Money cuts resi and BTL rates
However, I can’t help feel that – for a Chancellor who clearly wants to be remembered for his boldness – there were some real opportunities missed that could have been incredible game changers, and could have given the UK housing market a much rosier future over a much longer term.
There are, however, many considerations to be made, not least those which we might deem more political than others.
For instance, stamp duty is undoubtedly a powerful political lever, given the impact it has and – even with just a slight amount of tinkering – what it can mean for the housing market.
For that reason, governments, of any persuasion, have clearly felt loathe to give up that influence and ability to stimulate, especially given they no longer have Bank Base Rate within their arsenal of measures. In that regard, Rishi Sunak is no different from his recent predecessors.
However, what we have tended to find with stamp duty recently is that it has become a ‘go to’ measure in perceived times of crisis.
I’ve lost count of the number of times the government has changed stamp duty over the last decade, but I know it’s been many, and with every change, the market has endured a frantic period, normally followed by a marked reduction in activity.
It can be, to coin a phrase, ‘boom and bust’, and part of me wonders whether this is particularly helpful for anyone, whether they are a seller or buyer, or indeed any kind of stakeholder in the housing market.
For those reasons, and to introduce what I believe would be a far more stable environment and one which could generate far greater levels of GDP and ultimately, tax-take, for the government, I’m of the opinion that stamp duty should be scrapped completely.
While mid-pandemic may not feel like the right time to scrap a taxation policy that ordinarily brings in billions of pounds to the Treasury, there are compelling economic arguments based on the ongoing advantage such a policy would have for transaction numbers, and the greater benefit the UK economy with each and every new housing sale.
Now, clearly this would be a major shift for the housing market, and you get the sense that, for some, scrapping an archaic tax such as stamp duty which truly gets in the way, would have to be replaced with something else.
I’m not so sure, but I did read recently about the ‘Fairer Share’ campaign which is proposing stamp duty, council tax and the ‘bedroom tax’ are all scrapped and replaced with a flat-rate payment based on the current value of a property.
Whether the government would go this far is a moot point, but even if it were to focus solely on stamp duty, there have been a number of reports suggesting the overall impact would be positive.
Back in 2017 the CBRE argued that between 2012 and 2017, 146,000 transactions did not go ahead, because developers were put off building due to the impact of the tax.
And, you need only look at the boost in activity we’ve seen during this nil rate holiday period to see just what could be achieved over a longer timescale. Stamp duty should not be the sacred cow many in Government believe it to be.
One final point on the Budget, and perhaps the biggest housing market disappointment was the lack of mentions for housing supply and measures to seriously boost it.
No sooner had the Chancellor finished speaking than the share prices of the UK’s major housebuilders were surging upwards.
And this, without any requirement being explicitly placed upon them (or others) to contribute more to the overall supply of homes.
Now, the government might well argue that its policies affecting landlords have freed up rental homes for purchase by first-timers in recent years, but as we know this can adversely affect much-needed private rental sector supply while many transactions are between landlords, rather than moving such homes from PRS to owner-occupation.
In that sense, supply is still a major concern, and as we know boosting demand while keeping supply at still very low levels, is likely to mean prices rise further, which makes it even harder for first-time buyers to get on the ladder, even when you’ve introduced a mortgage guarantee policy designed to help them to do just that.
The lack of supply in our market has been endemic for far too many years, and if the government does want to turn ‘Generation Rent’ into ‘Generation Buy’ it needs to address affordable home building, and perhaps be much tougher with the housebuilders on construction volumes.