Tax relief call for homebuyers

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The Independent Online
BY DIANE COYLE

Economics Correspondent

Nationwide Building Society said yesterday the Government should restore confidence in the housing market by providing tax incentives for first- time buyers.

Repossessions by Nationwide rose last year, although the number of borrowers in arrears was down by nearly a third and provisions for losses on loans fell. Brian Davis, chief executive, criticised new social security rules that will limit benefit for unemployed home-owners, and said the Government should stop kicking the housing market.

Treasury officials are considering plans to stimulate the housing market. The industry expects the announcement of a new tax incentive, offset by phased reductions in mortgage tax relief.

Separately, yesterday brought an additional measure of relief, with no sign of a rise in base rates after the monthly meeting yesterday between Kenneth Clarke, Chancellor of the Exchequer, and Eddie George, Governor of the Bank of England.

Unlike last month, when Mr Clarke confounded expectations of a base rate increase, the Treasury did not make a formal announcement of a decision to leave rates unchanged at their current level of 6.75 per cent yesterday.

The Bank would be free to act at any convenient moment if the Chancellor had agreed to a rise.

However, analysts concluded that interest rates would stay put for now.

Ian Shepherdson, an economist at HSBC Markets, said: "Nothing has happened to deflect Mr Clarke from his views." The Chancellor said last month that there were signs growth was slowing to a more sustainable pace.

Yesterday brought more evidence favouring this analysis. Housing starts were up slightly in April compared with the previous month, but in the three months to April were 13 per cent lower than the same period a year earlier. Separate figures for the Central Statistical Office's longer leading indicator pointed to a downturn in the economy from mid-1995.

Gilts and share prices fell due to weakness in overseas markets. But the Bank of England's case for a base rate increase - that the weakness of the pound will trigger higher inflation - is unlikely to have changed since May.

The number of Nationwide's borrowers in arrears on mortgage payments was 32 per cent down in the year to 4 April. The society's pre-tax profits were 32.2 per cent higher at pounds 345.4m.

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