The house that Alistair built?

The Chancellors intention to "seek to increase the affordability of longer-term fixed rate mortgages" appears to be yet another re-announcement of the proposal first announced by his predecessor Gordon Brown some years ago and re-announced by Mr Brown in Budget 2007. Some 29 mortgage lenders offer fixed rate products with durations of 10 years or more but only a relatively small proportion of borrowers actually choose a long-term fixed rate.

The Chancellors call was met with a mix of caution and cynicism. The Council of Mortgage Lenders said "We look forward to seeing the proposals that the Chancellor said he will bring forward in the budget. There is a key trade-off for borrowers in choosing a longer-term fix relating to the potential costs of exiting the deal early and this is the key feature that needs to be addressed to stimulate mainstream consumer appetite."

However John Postlethwaite of Punter Southall was less impressed "It is not the first time that we have had the government trying to encourage the uptake on longer term fixed rate mortgages which would be good in their long term battle with inflation. However we need to see the proposals that he will bring forward to make it attractive to the lenders to offer competitive products and clients to want to take them. As any previous initiatives in this area have so far been unsuccessful because traditionally borrowers have been attracted to the lower costs and flexibility of the shorter term rates.

"Any longer terms deals should be attractive in both cost and flexibility terms. For example someone taking a 10 year fixed rate would not want to be tied down for 10 years without the ability to review things. If you look at a first time buyer in the first 10 years they may move house twice get married and have children. Although they might like the idea of a long term fixed rate at the start their changing circumstances would mean it may not be suitable for the whole 10 years."

Once again the Stamp Duty Land Tax dog didnt bark. Pious hopes from Mr Darling saying the Government will explore whether it can reform the stamp duty treatment of initiatives including the First Time Buyers Initiative to bring it into line with other shared ownership products impressed no-one.

Robert Bryant-Pearson Chief Executive of Allied Surveyors commented "I am both surprised and frustrated that stamp duty did not feature... The current stamp duty system is insufficient and seriously flawed." One may echo the sentiments but why the surprise

On more encouraging notes the Chancellor did announce plans to increase spending on flood defences and to encourage the building of more homes. But as the Council of Mortgage Lenders pointed out "It is crucial that these measures go hand-in-hand to achieve sensible results and minimise the number of homes at risk of flooding."

In the Comprehensive Spending Review element of his speech Mr Darling said the Government would be providing resources and co-ordination needed to deliver on the Housing Green Paper Homes for the Future which aims to deliver more than 240000 net additional homes a year by 2016.

On a smaller scale for those doing up empty property there was also a small bone thrown their way. Secondary legislation will be introduced to come into effect on 1 January 2008 to ensure that renovations and alterations to residential properties that have been empty for at least two years will be eligible for a reduced VAT rate of 5. Currently such properties must stand empty for three years to qualify for the reduced rate.

09 October 2007 Moneyextra.com

Moneyextra.com recommends you take independent financial advice before acting on any article

2009-02-17 00:00:00 © Moneyextra.com