Date Published 16 February 2012
The Council of Mortgage Lenders is calling for the Stamp Duty break for first-time buyers to be extended beyond March 24 amidst fears of a spring slump. The CML also expressed concerns that overall lending for house purchase will fall this year in any case.
The CML says that it fears a distortion in the market, with a damaging fall in activity after the exemption ends, and argues that it would cost little to keep the break going.
CML chief economist Bob Pannell said: `The CML expects first-time buyer transactions to pick up as the concession end date looms nearer. For those who miss the deadline, the credit-constrained environment we find ourselves in means first-time buyers will increasingly have to fund Stamp Duty from their back pockets, so the end of the concession will have a real impact.`
The CML’s call has been backed by Charles Haresnape, managing director of Aldermore Residential Mortgages.
He said: "The CML is right to ask for the Stamp Duty exemption to be extended beyond March. The cost to the Government would be minor in comparison to the benefit it would offer home buyers on tight budgets. I believe it`s incumbent on both government and lenders to do everything possible to help first-time buyers and we need to see more being done to help this important sector of the market."
Separately, Santander Mortgages said it estimated first-time buyers had been saved £319m by the Stamp Duty concession, which came into play in March 2010.
Meanwhile, both the CML and RICS have said house sales have edged up slightly as first-time buyers looked to beat the end of the Stamp Duty holiday.
But the CML warned that overall mortgage lending this year could be lower than last year – which itself was 6% down on the year before.
RICS surveyors said they felt more optimistic about the market, although they also reported house price falls, with the majority expecting more to come.
The RICS said that supply of properties on the market rose slightly last month, but overall new buyer demand had dipped.
And while first-time buyer activity was up prior to the end of the Stamp Duty holiday, surveyors said that lack of affordable mortgage finance continues to hold back the market.
Meanwhile, the CML said that the number of mortgages to first-time buyers bounced up 7% in December compared with November. The number was also 14% higher than December the year before.
There were 18,700 loans advanced to first-time buyers, with a 3% rise in purchases of properties costing less than £250,000 – the price at which Stamp Duty will again be payable when the exemption ends.
The number of mortgages for home movers slipped 2% on the month in comparison, while remortgages declined 15%.
The final month’s figures for 2011 show what a mixed year it was for the mortgage market as a whole. Remortgage lending increased by 17% from 2010 to £47bn but house purchase lending, at £75bn, was 6% down on the previous year.
Within the house purchase market, lending to both first-time buyers and movers fell in 2011 but first-time buyers fared slightly better. There were 193,000 loans worth £23.4bn taken out by first-time buyers in 2011, down from 200,100 loans worth £23.9bn in 2010 – a 4% fall by volume and 2% by value.
Movers took out 316,500 loans worth £51.4bn last year, down from 343,200 worth £55.1bn in 2010 (down 8% by volume, 7% by value).
Paul Smee, CML director general, said: `We have been expecting a flow of first-time buyers on to the market as the Stamp Duty exemption ends in March. December’s figures appear to show this has now begun.
`The market in 2011, while still subdued, saw a welcome increase in annual gross lending for the first time since 2007, when the financial crisis began. With the Eurozone problems still rumbling on, however, we believe there is still a real risk that this year’s lending levels will be lower than those seen in 2011.`
David Whittaker, managing director of Mortgages For Business, said: `There is a very real danger that the end of the first-time buyer Stamp Duty holiday will mark the beginning of a new slump at the bottom of the housing market as a rush to complete transactions before the deadline is followed by an activity vacuum.
`This will put even more pressure on an already over-burdened rental sector and create more problems for buyers further up the housing ladder who rely on first-timers in their property chains.
`As a result, landlords and professional investors will continue to be relied upon to provide the safety net for the housing market.
`Lenders and government must recognise this contribution and provide investors with as much support as possible. If they don’t, the safety net will almost certainly be too small to catch everyone.`