Rescue plan to save property market

Alistair Darling is drawing up a series of radical proposals to revive Britain's beleaguered housing market as new figures show soaring numbers of homes being repossessed.

Among the measures being considered by the Chancellor are:

*A plan to reintroduce income support for mortgage interest payments for homeowners who lose their jobs.

*Suspending stamp duty so buyers only pay the tax after several years in their new home, or perhaps not until they sell the property.

*Creating a new, tax-free fund to help first-time buyers raise the deposit they need to get on the housing ladder.

Ministers are also looking at extending schemes to buy empty properties, particularly in city centres, and turn them into social housing. Mr Darling is desperate to have the proposals ready by the time MPs get back from the summer break in order to stave off a backbench rebellion against Gordon Brown. But yesterday he gave a grim warning that the economic downturn is likely to be prolonged. Economists believe the country could be on the brink of recession, with growth almost at a standstill.

Pressed on reports that he planned to offer a stamp duty holiday to house buyers, Mr Darling left open the possibility of stopping the tax altogether for the duration of the current downturn.

But The Independent has learnt that the most likely course of action will be to defer, rather than cancel, the stamp duty charges paid by the majority of home buyers. Officials, who emphasised that no final decisions had been taken, said the idea would have the attraction of providing a filip to the housing market without ultimately depriving the Treasury of the billions of pounds raised from stamp duty.

Ministers are also preparing to announce a new saving scheme aimed at first-time home buyers. It would enable them to put cash into a tax-free fund similar to Individual Savings Accounts to help build the deposit required by most lenders, who are now refusing to offer 100 per cent mortgages because of the credit crunch.

Asked about the stamp duty holiday plan, Mr Darling said: "I am looking at a number of measures and I am not going to be drawn on that today because we have not concluded what exactly we need to do. It is helping people that is important. I want to look at a range of options."

Stamp duty is paid at 1 per cent on homes bought for between £125,001 and £250,000, 3 per cent between £250,001 and £500,000, and 4 per cent for properties bought for more than £500,000. Overall, the levy has brought in £31.5bn over the past 10 years, and has increased rapidly as house prices have risen.

Under another plan being examined at the Treasury, stamp duty would be be levied at its higher rate only on that part of the price above the threshold, rather than triggering the tax on the whole amount. That would also remove the distortions in the market around the threshold levels.

Home financing specialists questioned the effectiveness of altering the stamp duty regime. They said the price paid by a first-time buyer was about £130,000, only just liable for the duty, and further falls in prices would bring more properties out of stamp duty. A more significant barrier to ownership for first-time buyers remains the disappearance of the 100 per cent mortgage.

There are also signs that buyers are waiting for house prices to decline further. Approvals of new mortgages are down 70 per cent on their peak a year ago, according to the Bank of England.

The Financial Services Authority said 9,152 homes were repossessed in the first three months of the year, a rise of 40 per cent on the same period in 2007. It also reported that the number of mortgages three months or more in arrears rose by 15 per cent, to 302,000, in the three month period – 2.5 per cent of Britain's total mortgage loan book.

The Council of Mortgage Lenders has talked to the Government about a return to income support for mortgage interest payments for homeowners who lose their jobs. But supporting mortgage holders would be costly and could put too large a strain on government finances.

Ministers could also strongly encourage the Bank of England to reform its new Special Liquidity Scheme, which would allow banks to swap unmarketable but relatively good quality mortgage-backed securities for government securities. Thus, the state in effect lends the banking system the money to grant mortgages, using older mortgage books as collateral on the loan, albeit at a punitive rate of interest.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
Arts and Entertainment
Buttoned up: Ryan Reynolds with Helen Mirren in ‘Woman in Gold’
filmFor every box-office smash in his Hollywood career, there's always been a misconceived let-down. Now he says it's time for a reboot
News
people
News
Actress Julianne Moore wins the Best Actress in a Leading Role Award for 'Still Alice' during the 87th Annual Academy Awards in Hollywood, California
people
Sport
Ross Barkley
footballPaul Scholes says it's time for the Everton playmaker to step up and seize the England No 10 shirt
News
'We will fix it': mice in the 1970s children’s programme Bagpuss
science
Life and Style
2 Karl Lagerfeld and Choupette
fashion
  • Get to the point
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Customer Service Executive

£18000 - £22000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Retail Buyer / Ecommerce Buyer

£30000 - £35000 per annum: Recruitment Genius: Working closely with the market...

Recruitment Genius: Sales Executive - CAD Software Solutions Sales

£20000 - £50000 per annum: Recruitment Genius: A reputable company, famed for ...

Ashdown Group: Client Accountant Team Manager - Reading

Negotiable: Ashdown Group: The Ashdown Group has been engaged by a highly resp...

Day In a Page

War with Isis: Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria's capital

War with Isis

Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria
Scientists develop mechanical spring-loaded leg brace to improve walking

A spring in your step?

Scientists develop mechanical leg brace to help take a load off
Peter Ackroyd on Alfred Hitchcock: How London shaped the director's art and obsessions

Peter Ackroyd on Alfred Hitchcock

Ackroyd has devoted his literary career to chronicling the capital and its characters. He tells John Walsh why he chose the master of suspense as his latest subject
Ryan Reynolds interview: The actor is branching out with Nazi art-theft drama Woman in Gold

Ryan Reynolds branches out in Woman in Gold

For every box-office smash in Ryan Reynolds' Hollywood career, there's always been a misconceived let-down. It's time for a rethink and a reboot, the actor tells James Mottram
Why Robin Williams safeguarded himself against a morbid trend in advertising

Stars safeguard against morbid advertising

As film-makers and advertisers make increasing posthumous use of celebrities' images, some stars are finding new ways of ensuring that they rest in peace
The UK horticulture industry is facing a skills crisis - but Great Dixter aims to change all that

UK horticulture industry facing skills crisis

Great Dixter manor house in East Sussex is encouraging people to work in the industry by offering three scholarships a year to students, as well as generous placements
Hack Circus aims to turn the rule-abiding approach of TED talks on its head

Hack Circus: Technology, art and learning

Hack Circus aims to turn the rule-abiding approach of TED talks on its head. Rhodri Marsden meets mistress of ceremonies Leila Johnston
Sevenoaks is split over much-delayed decision on controversial grammar school annexe

Sevenoaks split over grammar school annexe

If Weald of Kent Grammar School is given the go-ahead for an annexe in leafy Sevenoaks, it will be the first selective state school to open in 50 years
10 best compact cameras

A look through the lens: 10 best compact cameras

If your smartphone won’t quite cut it, it’s time to invest in a new portable gadget
Paul Scholes column: Ross Barkley played well against Italy but he must build on that. His time to step up and seize that England No 10 shirt is now

Paul Scholes column

Ross Barkley played well against Italy but he must build on that. His time to step up and seize that England No 10 shirt is now
Why Michael Carrick is still proving an enigma for England

Why Carrick is still proving an enigma for England

Manchester United's talented midfielder has played international football for almost 14 years yet, frustratingly, has won only 32 caps, says Sam Wallace
Tracey Neville: The netball coach who is just as busy as her brothers, Gary and Phil

Tracey Neville is just as busy as her brothers, Gary and Phil

The former player on how she is finding time to coach both Manchester Thunder in the Superleague and England in this year's World Cup
General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?