Even though we have got used to having a housing crisis rather than a housing market, evidence of a new tide of repossessions will probably push the Government into action. It did in 1991, when the then Chancellor Norman Lamont introduced the stamp duty holiday and arm-twisted building societies into launching mortgage rescue schemes.
Following tomorrow's statistics from the Council of Mortgage Lenders, forecasts to be published later this week by the stockbroker UBS predict the number of repossessions will climb from 49,210 last year to 55,000 this year and 65,000 in 1996. The analyst Robert Thomas says: ''With this week's figures we will find out whether we have learnt to live with this problem or whether another increase will force the Government into action.''
John Wriglesworth, director of strategy at Bradford & Bingley Building Society, argues that with the number of repossessions likely to stay high until the end of the century, ''the Government must do something to restore faith in the housing market.''
The mortgage lenders have been lobbying hard for a government retreat from its plans to cut back income support for mortgage payments, due to come into effect in October. The industry saw the Government's switch to direct payment of income support to lenders in 1992 as a quid pro quo for their agreement to rein back the number of repossessions. They believe the Government is breaking its side of the bargain.
Adrian Coles, director general of the Council of Mortgage Lenders, warns that the income support cuts will be a direct threat to the downward trend in mortgage arrears and repossessions. He said lenders were continuing to help troubled borrowers, ''yet the Government does not appear to be showing an equal long-term commitment to bringing down mortgage arears.''
Julian Birch, of the housing charity Shelter, agrees that the lenders will increase the pace of repossessions if there is no government retreat. ''The main need is stability at the bottom end of the market,'' he says. ''The changes to income support will have exactly the opposite effect.''
A pick-up in repossessions in a moribund market could have wider repercussions. If most mortgage lenders decided to get tougher with households in arrears later this year, a new wave of sales mainly at the bottom end of the market might well push house prices lower.
However, lenders hold out little hope of any more than a cosmetic adjustment to the income support restrictions. They fear instead a quick-fix gimmick in the Budget.
A number of big lenders favour one proposal, floated by the Prime Minister's policy unit, to phase out tax relief on mortgage interest payments and replace it with a one-off grant for moving. Others would be horrified by further erosion of the tax relief, which Mr Major has anyway publicly ruled out.
A second measure that would also win favour would be the abolition of stamp duty. What the industry, backed by the entire economics profession, does not want is a temporary stimulus.
Michael Hughes, director of research at BZW, says: ''The problems affecting the housing market are structural. There would be dangers in any measures which might bring results before the General Election.''Reuse content