David Prosser's Outlook: The real victims of the housing market crisis need all the help they can get

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The Independent Online

His colleagues in the housebuilding industry won't thank him for his honesty, but Taylor Wimpey's chief executive, Pete Redfern, hit the nail on the head yesterday in admitting there is little the Government can do to fix the housing market. While several of Taylor Wimpey's rivals have called for a government bail-out of their beleaguered industry, Mr Redfern concedes that a suspension of stamp duty or even a cut in interest rates would not restore the market to health.

He is quite right. The housing market slump began when mortgage availability was credit crunched, choking off demand for property. A massive Bank of England liquidity package has not improved mortgage market liquidity and, in any case, the housing slowdown has now spiralled out of control. Britain's economic slowdown is a product of a collapse in consumer confidence that was in great part caused by the housing market's decline. But that slowdown now has a life of its own and is feeding back into the property sector's problems.

Moreover, while Mr Redfern didn't say as much yesterday, his fellow chief executives have no right to expect the Government to intervene in support of shareholders in our major housebuilders. There has been no shortage of good times for the property sector in recent years and builders ought to have been preparing for a leaner period.

Instead, the Government's priority should be to protect the real victims of the economic slowdown – those who face the prospect of losing their homes because they can't keep up with mortgage repayments. In the current housing market climate, these borrowers don't have the option of selling up before the bailiffs arrive and they need all the help they can get.

This isn't what the Treasury wants to hear, but delivering that help is going to require spending some money. A quick and easy option that would help many homeowners get through a difficult period would be to offer more generous income support to help people pay mortgage interest. Currently, struggling borrowers don't qualify for the benefit for nine months and even once they do, it may not cover their interest payments in full.

Extending income support does not have to be a total giveaway. One option, for instance, would be to require borrowers to repay some or all of the benefits they receive once their finances recover.

There is also merit in exploring mortgage rescue plans, an idea floated by the Council of Mortgage Lenders (CML) and backed yesterday by the Liberal Democrat Treasury spokesman, Vince Cable. These schemes are already being trialled by local authorities and housing associations on a very limited basis in different parts of the UK, but offering them more widely will require a slug of funding from central Government.

The idea of a mortgage rescue plan is that borrowers struggling with their repayments sell part of the equity in their homes to a social landlord. They continue paying the mortgage on what they still own, plus some rent on the equity sold. There are, in principle, real attractions to these schemes. Above all, the borrower gets to stay in their property. They also get a capital sum for the equity given up, which may enable them to pay off other debts. And offering the schemes through housing associations and local authorities should mean fewer homeowners end up taking out the dodgy "sale and leaseback" plans available from more unscrupulous lenders in the private sector. These operate in a similar way but often prove to be total rip-offs.

As the CML points out, however, Mr Cable's vision of a standardised and regulated mortgage rescue plan is not without difficulties. The biggest of these is the one that stymied the Conservatives in the early Nineties, when they though a very similar scheme would help up to 20,000 borrowers facing repossession. What the Tories discovered was that even with housing associations charging very reasonable levels of rent on the equity they bought, the combined mortgage and rent bill for homeowners was very often higher than the single mortgage repayment they had previously been unable to make. Rather understandably, take-up was somewhat limited.

More positively, since the early Nineties a handful of housing associations have come up with solutions to this problem. And the Scottish Executive committed £25m to mortgage rescue plans north of the border last week – the results of its initiative will be worth watching closely.

However, we shouldn't kid ourselves. The CML expects repossessions to rise significantly in the coming months and to reach about 45,000 this year. The sort of ideas being kicked around might reduce that figure by a few thousand at best (though it's difficult to imagine ministers getting their act together quickly enough to make a difference in 2008). That would be a welcome reduction, of course, but hardly indicative of a panacea.

Competition will heat up for price comparison sites

Blessed are the middlemen. Or at least that's the view of Moneysupermarket.com, the price-comparison website whose share price has halved since its flotation a year ago despite a series of mostly encouraging trading updates. Yesterday's interim results did not disappoint either – the founder and chief executive, Simon Nixon, is entitled to feel pleased with profits that have more than doubled.

Price comparison sites are benefiting from the economic slowdown because more people need to shop around for everything, from home energy to credit cards. This has compensated for a fall in demand for mortgages, previously a decent source of income for Moneysupermarket.com, where the housing market's woes have reduced those looking for home loans.

Given all this, why does the market remain so unconvinced by Moneysupermarket.com? Well, despite its undisputed market dominance, the company is pretty titchy compared with some of those now eyeing the price-comparison sector and licking their lips. Even if the thought of aggressive competition from Tesco, already in this market but now expanding its presence, does not scare Moneysupermarket.com, the much-rumoured entry of Google should.

Earlier this summer, Mr Nixon sent the Ontario Teachers Pension Fund packing. It had made a very preliminary approach, but Moneysupermarket.com's founder is convinced any bid made while the company's share price remains at the current depressed level would seriously undervalue the business he has built.

Fair enough, and the Canadians have not returned. Still, if Google or Tesco decide a bid for Moneysupermarket.com represents their best chance of moving into this sector with conviction, Mr Nixon may find it harder to say no.

The beginning of the end for Sir Fred at RBS?

Will Stephen Hester's appointment yesterday as a non-exec at Royal Bank of Scotland hasten the departure of Sir Fred Goodwin, the chief executive?

Mr Hester has been brought in to beef up the RBS board, criticised for failing to hold Sir Fred to account over his determination to press on with the purchase of ABN Amro, despite the credit crunch, as well as this year's humiliating £12bn rights issue. Along with two other new heavyweight non-execs, he brings valuable banking experience to the board.

Sir Fred deserves credit for having the guts to accept such formidable figures. But after last month's disastrous interim results, which included a £6bn writedown of assets, he may not get it.

RBS shareholders have stuck by Sir Fred. But the man himself – renowned for his fierce will – is likely to bridle at being more closely monitored. This is the price of survival, but Sir Fred may not feel it is worth paying.

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