Commentary: Turning the key for first-timers

For the housing market, a one percentage point cut in bank base rates is better than a kick in the teeth. But before there is too much leaping in the streets, consider two factors. The first is that the interest rate cut is not being passed through wholly to home-owners. Thanks to the level of bad debts in the sector, most building societies and other mortgage lenders are widening their profit margin ('spread') and opting for a cut of 0.75 percentage points instead, leaving mortgage rates just below 10 per cent.

The second point is that there is unlikely to be any real recovery in either house prices or turnover until the first- time buyers re-enter the market in a big way. They are the key because they allow people who now want to find larger accommodation to move on. Without them, chains cannot begin. Turnover freezes at a low level. But the problem with positing a return of the first-time buyer is simply that life is being made much more difficult for them.

This is in part psychological: they do not want to buy until they are sure that the asset is about to rise in price. Many first-time buyers of a year or two ago are now looking at the loss of their 5 per cent deposit (and perhaps their life savings) because of the fall in house prices. But it is also because the size of the required deposit and the price of mortgage indemnity insurance have risen.

In general, the Government is right to argue that the recent easing in interest rates and the pound means that an autumn package is less necessary. But it might make an exception in the case of incentives for first-time buyers.