Chancellor urged to help mortgage market

The Association of Mortgage Intermediaries (AMI) has called on the Chancellor to introduce measures for the mortgage market in his annual budget, due next week.

AMI says the results of the credit crunch could hamper the ability of people to get mortgages and they will become considerably more costly for consumers.

Richard Farr, director of AMI, says: “The mortgage market is going through a turbulent period, largely due to the effects of the liquidity crunch. Lenders have said on the record that they are looking to improve their margins rather than increase market share, so while bank rates have been falling, last week actually saw an increase in the variable rates being charged by some lenders.”

Farr has called on the Chancellor to take action in a number of areas currently affecting the mortgage market.

Firstly, he fears the changes to Capital Gains Tax will encourage more short-term buy-to-let landlords over long-term investors, which he believes will harm consumers and the market.

AMI is also calling for stamp duty thresholds to rise in line with property prices, in order to help first time buyers into the market. The association wishes to discuss the possibility of exempting first time buyers from Stamp Duty.

“Stimulation of the first time buyer market would provide a boost to the entire housing chain. The economy can be seriously affected by a slow down in housing transactions with knock on effects being felt by developers, estate agents, financial advisers, surveyors and retailers,” explains Farr.

He says the proposed gold-standard system for grading mortgage securities could work, but warns that such a scheme should not be limited to prime mortgages, as many types of non-conforming lending also have good performance histories.

Lastly, AMI wants to introduce income support for mortgage interest, as those who own their own homes cannot claim benefits to help them pay their mortgage, while those in rented accommodation can apply to have their rent paid by the state.

Farr believes the risks to the mortgage market are major issues that need to be addressed.

"The danger is that fewer people will get mortgages, and those who do will have to pay a great deal more for them. Partly as a result of the liquidity crisis lenders are restricting some of their innovative products that have allowed some first time buyers, the credit impaired and buy to let investors, into the market.

“We believe the government should provide a boost to the market and support to consumers who will face a difficult period with tens of thousands of people coming off fixed rate loans in the next year."

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John Bakie
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