Major under pressure to stave off housing crisis

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The Independent Online
The Prime Minister is coming under increasing pressure from building societies and insurers to produce a sweeping package of changes to kick- start the housing market.

In the past week, mortgage lenders have warned the Government that unless action is taken before November's Budget, the housing market will be plunged back into crisis.

Lenders fear that this month's figures will show the steady 18-month decline in the number of repossessions has now stopped.

This comes amid signs that the number of property transactions last month may show another downturn. The figures, collected by the Inland Revenue, will be released next week.

The Council of Mortgage Lenders, the industry's trade body, believes they will show little improvement on the 98,000 transactions recorded in May, itself the lowest figure since June 1993.

The CML also expects the 18-month fall in home repossessions to bottom out and remain at about 50,000 for the foreseeable future.

Adrian Coles, CML director-general, said: "I see no reason for the transaction figures to show a sharp improvement. Nor is there likely to be a major change in the number of repossessions compared to 1994."

Mr Coles said regular meetings were taking place between the CML, other pressure groups and ministers to press for more help to the housing market, but with little sign of success: "The Treasury's argument is that the economic recovery will have an eventual effect on confidence and that this will in turn have an impact on the housing market. Therefore there is no need for special stimuli.

"The evidence, however, appears to show that the economy is slowing down. Housing is an important part of the mechanism for regenerating the economy."

The CML is calling for a range of measures, including an end to cuts in mortgage interest relief, tax breaks for first-time buyers and others burdened with negative equity, and concessions on loans for property repairs.

Backing for the CML came yesterday from two insurance companies, Legal & General and Refuge.

L&G's share price closed down 10p at 556p after it announced a 12 per cent first-half drop in worldwide new life and pensions sales.

Ian Prosser, chief executive, said: "The housing market is the key reason why there is a lack of confidence in the economy. If the Government does not take key measures soon to revive it I do not think there is any chance of the feel-good factor returning before the general election."

L&G is calling for a rise in the mortgage tax relief limit from pounds 30,000 to pounds 50,000.

At Refuge, long-term single premium pension income was down 61 per cent in the first six months and regular pension products down 24 per cent.

John Cudworth, chief executive, said: "People do not want to enter into long-term commitments when they are worried about whether they will have a job in a few months."