Mortgages: Eligibility — [Mr Philip Hollobone in the Chair]

Part of the debate – in Westminster Hall at 4:30 pm on 23rd October 2017.

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Photo of Paul Scully Paul Scully Chair, International Development Sub-Committee on the Work of the Independent Commission for Aid Impact, Chair, International Development Sub-Committee on the Work of the Independent Commission for Aid Impact 4:30 pm, 23rd October 2017

I appreciate my hon. Friend’s important point, which I will come to later. Rent clearly does not give any guarantee for the future but it gives a better guide to creditworthiness, in the sense that people have spent time paying rent regularly, on a monthly basis. As we heard, the petitioner spent £70,000 with little to show for it other than that he paid his bills, whereas obviously, when someone has the aspiration of home ownership, that same £70,000 could have been building up equity. If someone has a good record in one area, they would hope that that, combined with all the other checks that banks need to do, would be good for credit for a mortgage as well.

The Government have doubled their housing budget and are investing £7.1 billion in the expanded affordable homes programme to deliver 225,000 affordable housing starts by March 2021. In addition, the housing White Paper sets out bold new plans to fix the broken housing market and build more homes across England. Starter homes, which are targeted at the first-time buyers we have been talking about, form an important part of the Government’s action to help more than 200,000 people become homeowners.

A £1.2 billion starter homes land fund will be invested to support the preparation of brownfield sites for starter homes and other affordable home ownership tenures. I am delighted that this year we will see the first starter homes being built on brownfield sites across the country. They will be built exclusively for first-time buyers between 23 and 40 years old, at a discount of at least 20% below market value. Alongside that, a new rent-to-buy scheme will help hard-working households to benefit from a discounted rent set flexibly at levels to make it locally affordable so that they can save for a deposit to purchase their home.

Stamp duty means that the average first-time buyer typically faces a tax bill of £11,427 here in the capital according to the Land Registry, which recorded the average price paid by new entrants to the London property market as £428,546. Even a starter flat costing a quarter of a million pounds attracts a stamp duty bill of £2,500. In my view, the Government should aim to take most first-time buyers and some downsizers purchasing smaller properties out of this tax entirely, to reduce the burden on family homes, and to fix anomalies such as those around shared-ownership properties, which are an increasingly popular way to get on the housing ladder.

The evidence is clear: stamp duty, like all transaction taxes, reduces the level of transactions. The effects can be pretty stark. For example, ahead of the buy-to-let surcharge in March 2016, mortgages soared by 71% but then dipped to 60% the month after. That was not just a short-term effect. Six months later, in December 2016, buy-to-let mortgage lending was down by nearly 40% on the year before, whereas other mortgage lending was up.

Introducing the buy-to-let surcharge clearly reduced transaction levels, and the best way to boost them again is to cut stamp duty for homeowners, which should boost transactions and economic growth. By focusing on residential homes, such a cut would also boost home ownership. At the same time, shared ownership—an increasingly popular way to help people buy part of a property—needs stamp duty reform. Currently, the providers of these affordable home ownership properties and their customers often pay twice: providers pay on the whole property and then shared owners pay again when they buy their share. Stamp duty in such cases should be charged only once, making it even more affordable for people to get on the housing ladder.