Today’s budget was rather more housing focused than usual.
In his three previous dispatch box speeches he has rather tinkered with the property market by introducing measures say as New Buy that have failed to impact. Pump priming the banks with money set for mortgage lending has largely failed as lenders have taken the additional Bank of England funding and simply sat on it to bolster their balance sheets.
Budget 2013 is different. The Chancellor has announced £3.5 billion of assistance to buyers seeking to purchase new homes specifically and up to a rather surprising, heady limit of £600,000. That’s a welcome move although unlikely to single handedly bolster the ailing property market.
But the BIG revelation this afternoon was his move to use £130 billion of government guarantees to provide, in effect, a debenture for ALL home owners (not just first time buyers) to gain a mortgage even if they have a deposit that is too low to inspire mortgage lenders. The exact details are yet to be clarified as I write but it seems that a 20% deposit will be guaranteed by Government if a prospective borrower has just 5% to put down.
The scheme will start in 2014 and last for three years.
Those in power seem at last to have recognised what we have been saying for some time. A healthy property market is fundamental to the wider economy. When home owners feel confident that their house price is safe, indeed rising, and that their equity is not under threat, they are more inclined to stimulate the economy with consumer spending.
We are delighted that Mr Osborne has had the wisdom to grab the property market by the scruff of the neck today in order to drag it back to buoyancy.
Everyone will benefit from it.