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A £1.8bn package to help the housing sector was unveiled by the chancellor, including extra cash for social housing and improved support for people struggling to meet their mortgage bills.
At the same time, the government's "mortgage tsar" warned that unless ministers use an extra £100bn of taxpayers' money to guarantee the home loans market, it could dry up completely next year.
Many experts claimed there was little in yesterday's pre-budget report to restart the ailing property market or encourage first-time buyers, with Alistair Darling resisting calls for an extension of the stamp duty holiday announced in September.
Days after figures confirmed that the number of repossessions had hit a nine-year high, the chancellor announced a series of measures to provide help for families in financial difficulty, with the aim of ensuring that seizing people's homes was always a "last resort".
• Homeowners struggling to meet mortgage payments must be given at least three months' grace before banks begin repossession proceedings. "This will give homeowners time to work with lenders to find a solution," he said.
Many lenders, including Nationwide building society, do wait three months or more before initiating repossession proceedings, so this is not a huge step, though it was important to remind lenders they must help those who are struggling, said Melanie Bien, of the mortgage broker Savills Private Finance.
• The government is extending its £200m "mortgage rescue scheme" designed to help up to 6,000 of the most vulnerable homeowners facing repossession. Under this initiative, eligible families will be able to sell their home to a housing association and then rent it back at a level they can afford. Alternatively, they could sell a share of their property.
While the scheme was expected to be fully working in the new year, more than 60 councils across England were "fast-tracking" it and would start taking applications from the beginning of December, said a Department of Communities and Local Government spokeswoman.
The government is also extending the scheme to cover families at risk of losing their homes because of "second-charge" mortgages - additional loans secured on their homes.
• There will also be more generous state help for people struggling to pay their home loan bills. At present, anyone who has lost their job will not receive any support to pay their mortgage for the first 39 weeks of unemployment; and, after that, the benefits will only cover the interest on the first £100,000 of the mortgage. From April, income support for mortgage interest benefit will start after 13 weeks, and was to be paid on the first £175,000 of the mortgage - but the chancellor upped this to £200,000 yesterday. Darling is also bringing forward an extra £775m this year and next to invest in thousands of new and modernised social homes, as well as regeneration projects.
But many experts said too little had been done to revitalise the housing market.
Jonathan Turpin, of home move website Moveme.com, said that the package "offers little in the way of assistance for the large proportion of first-time buyers who want to purchase their own home but are being restricted by high deposit requirements and high moving costs".
Meanwhile, in his report on mortgage financing, Sir James Crosby paints a bleak picture for the home loan industry. The former chief executive of the troubled lender HBOS warned there was a danger of house prices falling too far as the shortage of funding for mortgages feeds on itself.
"Such a downward asset spiral would have serious consequences across all segments of the housing market and across all industries dependent on housing investment and activity," said Crosby.
He added: "I believe new net lending is very likely to fall below zero in 2009 (compared to around £40bn this year and £108bn in 2007) with only a modest recovery likely in 2010. No net new mortgage lending across a full calendar year would be unprecedented and is likely to be associated with further weakness in consumer spending and an increase in unemployment."
Darling surprised lenders by sharing Crosby's concerns and has promised to work on a detailed scheme that could be sent to the EU for state aid approval. However, lenders were disappointed there was no timeframe on this promise.
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