Lunchtime news Monday 1 October 2023

David Cameron launched the ’Great Conservative Fightback’ over the weekend, by announcing the first of a series of policies aimed at taking the momentum away from Labour. Stamp duty on properties worth up to £250,000 would be abolished for first-time buyers (meaning nine out of 10 first-time buyers would save an average of £2,000). George Osborne, the shadow Chancellor, also unveiled plans to cut inheritance tax, saying the shortfall would be recouped by increasing environmental taxes and tax on non-domiciled UK residents. The Conservatives also announced that the controversial Home Information Packs (Hips) would get the chop.

The timing of these policies may be important, as the HM Revenue and Customs website on Friday announced that homebuyers paid out a record £6.4 billion in property taxes last year, a 40.1 per cent increase on 2005/06, and almost nine times more than was paid when Labour came to power in 1997. The figures also show that families were forced to pay a record £3.5 billion in inheritance tax last year, up by 9 per cent.

Some of Britain’s poorest homeowners could see their mortgage costs rise by as much as 60 per cent over the coming months as the ‘credit crunch’ affects consumers. Credit ratings agency, Standard & Poor’s warned that UK mortgage holders who are soon to come off fixed-rate mortgages should expect a payment shock, particularly if they are have a poor credit history and fall in to the sub-prime group. The Council of Mortgage Lenders (CML) has recently calculated that about two million fixed-rate mortgages (about 17 per cent of the British market) will end before 2008. The figures suggest that sub-prime borrowers could see a rise of 26 per cent, with some of the worst off and those who took out cheaper interest only mortgages seeing an increase of as much as 60 per cent.

Hedge fund managers however are out to make a killing, gambling on a fall in the housing market according to the Sunday Telegraph. Speculators are placing bets on shares in housebuilding companies falling. Two of the UK’s largest property companies – Persimmon and Grainger, have seen a percentage of their shares ‘sold short’ as hedge funds borrow shares held by existing investors, sell them and buy them back when the prices have dropped. If successful, the funds bank the difference between the price at which it sold the shares and the price it pays to buy them back. If share prices rise, the gamble fails and losses can be significant.

The buy to let market of new purpose-built properties has lost 40 per cent of its value over the past year, according to a study by the Daily Telegraph. Recent auctions of new-build flats show that they are selling for 60 per cent of what investors paid for them. Property experts are warning the situation could get worse as local authorities are granting planning permission for hundreds more flats each week and developers are offering generous incentives for potential investors.

And finally, according to a Labour MP, the government has tightened rules on households receiving grants to go green using renewable technologies. The government’s scheme, Low Carbon Buildings Programme (LCBP) ran out of funding half way through the year, as the grants proved so popular. A new system of allocating grants was launched in May, but they have been drastically reduced to a maximum of £2,500 a home (down from £15,000), and many households are simply giving up. Off the £18.7 million allocated to the household stream for three years until June 08, so far only £5.23 million has been spent. ‘Now the level of the grants is pitched too low, and applicants are dropping out once they discover what funding the will get’, said the Labour MP, Lynne Jones. Britain produces 2 per cent of its energy from renewables and is committed to a target of 20 per cent by 2020.