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Osborne's 'dramatic intervention' will help boost housing market in Devon and Cornwall

By Western Morning News  |  Posted: March 21, 2013

  • Chancellor George Osborne before heading to the House of Commons to deliver his Budget statement

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Chancellor George Osborne yesterday offered hope to struggling homebuyers in Devon and Cornwall amid a grim Budget underlining the ailing condition of the British economy.

First and second-time buyers will need to find a deposit of just 5% to get the chance to move into new-build homes worth up to £600,000, it was revealed.

Families in the South West struggle to get on or move up the property ladder because of an unfavourable ratio of high prices to low wages that is worse only in London.

Buying a house in Cornwall now costs £220,083 – almost 13 times the average local wage. In Devon, it costs £234,610 – again 13 times annual pay in the county.

The Chancellor's Help-to-Buy scheme – a deliberate echo of Margaret Thatcher's council house Right-to-Buy scheme – was part of an "aspiration nation" Budget designed to boost business and ease the burden on working families.

Other eye-catching give-aways in the Budget included taking a penny off the pint to help save community pubs – but cider was excluded.

And by scrapping September's 3p fuel duty rise after a two-year freeze, a driver of a Vauxhall Astra will save £7 every time they fill up, the Chancellor claimed.

Corporation tax was slashed to 20% and the National Insurance allowance raised to boost small business, while the personal tax-free allowance will increase to £10,000.

But the hand-outs provided cover for a disastrous overall picture. Growth forecasts were halved for this year – down from 1.2 per cent to just 0.6 per cent – suggesting the economy is grinding to a halt.

The Chancellor described yesterday's package as a "Budget for people who aspire to work hard and get on".

But he added: "Today, I'm going to level with people about the difficult economic circumstances we still face and the hard decisions required to deal with them."

Labour said it was a "more of the same Budget from a downgraded Chancellor".

Westcountry MPs broadly welcomed the back-to-the-walls statement given the limited room for manoeuvre.

The eye-catching policies – which also included a childcare tax-break and future splurge of roads and building – will be principally paid for by cuts to unprotected Whitehall departments, a tax evasion crackdown and extending a public sector pay freeze.

The Chancellor also boasted the Government had created 1.25 million new jobs and reduced the deficit by a third.

The Help-to-Buy scheme for those struggling to find mortgage deposits will include £3.5 billion for shared equity loans, and a Government interest-free loan worth 20% of the value of a new-build house.

The Chancellor said the scheme will be available to everyone who wants to buy a home from next year.

A new mortgage guarantee, sufficient to support £130 billion of loans, will help people who cannot afford a big deposit.

The Government will also offer interest-free loans for five years for those wanting to buy new-build homes.

The loans will be available to those who can find a 5% deposit, with the loan worth up to 20% of the value of a home worth up to £600,000 and repayable when it is sold.

According to the National Housing Federation, in the South West the standard 25% deposit on an averagely priced home now stands at £55,021 – a figure the average wage-earner would take more than nine years to save.

The principle behind the scheme is two-fold: help struggling buyers to buy a home and in turn get more houses built, fuelling economy-boosting construction jobs.

Neil Parish, Conservative MP for Tiverton and Honiton, said: "If the Conservative Party is not the party of home-owners then what are we?

"Hopefully this should make a house in Devon more affordable."

Stephen Gilbert, Lib Dem MP for St Austell and Newquay, said: "This will directly benefit many families in Cornwall who currently struggle to save the money for a deposit, while battling with soaring house prices. Home ownership should be a reachable aspiration for local families."

Tim Jones, chairman of the Devon and Somerset Local Enterprise Partnership, said: "We're encouraged by the unexpected improvements for home buyers – that's always been one of our great clarion calls because we know how quickly it converts into jobs.

"If you get people on to the housing ladder it improves social mobility and helps the construction industry."

Andrew Berry, managing director of Truro-based Kernow Property Services, said: "For a long time we have seen people struggle to secure mortgages and therefore there has been limited movement in the property market.

"During the past three years we have seen things improve steadily and I believe that the new scheme will help the market recover and gain stability."

Mr Osborne told MPs Help-to-Buy is a "dramatic intervention to get our housing market moving".

He said: "For newly built housing, Government will put up a fifth of the cost. And for anyone who can afford a mortgage but can't afford a big deposit, our Mortgage Guarantee will help you buy your own home."

The idea was welcomed by mortgage lenders and housebuilders, but the Treasury was forced to rebut warnings that it risked fuelling a new property price bubble.

In a 54-minute statement, Mr Osborne said he wanted to send a message that Britain was "open for business", pledging to cut corporation tax to 20% by April 2015 – matching the lowest levels of any G20 country.

But the Budget underscored how the austerity years are poised to continue – with little end in sight and drawing comparisons to Japan's sluggish economy through the 1990s, which was dubbed the "lost decade".

The Chancellor blamed the downturn in the eurozone, currently gripped by a new crisis in Cyprus, which is trying to agree a £17 billion bailout.

He admitted that his target to cut debt as a percentage of GDP will now not fall until 2017/18 – two years later than planned.

Figures from the Office for Budget Responsibility suggest the Government's efforts to cut the deficit – the difference between money spent and earned – have stalled, and it will remain stuck at about £120 billion for three years.

Labour leader Ed Miliband seized on the worsening debt figures calling Mr Osborne a "downgraded Chancellor". He said: "Every Budget he comes to this House and things are worse, not better, for this country. Compared to last year's Budget: growth last year down, growth this year down, growth next year down, growth in 2015 down. All he offers is more of the same."

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  • Charlespk  |  March 21 2013, 4:01PM

    Irrelevant when considering the current inflated price of domestic dwellings and stagnation of the market. . Everyone's ability to service a mortgage has always differed. The current problem, exploited by Brown and the Labour Party was forecast by many. You clearly have no real comprehension of inflation and how lenders have now altered the risk in their favour. The 80's property inflation cost lenders a lot of money and so they changed the rules. Gordon Brown presided over Pyramid selling and persuaded millions of people that it would just go on an on. The mugs got badly burnt. . Both lenders and buyers.

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  • josdave  |  March 21 2013, 3:35PM

    The housing market went crazy in the 80s and no government of any colour has done anything about it. Taking two incomes into account when considering a mortgage application was in my opinion a big mistake. This allowed sellers to ask for higher prices knowing a mortgage would be available and plunged many into repossession problems if one partner lost his/her job or became pregnant. But the estate agents continue to rub their hands in glee when prices rise with no consideration for the misery it causes. When I bought my house in 1970 it was just over double my salary. Now look at the ratio it is out of control and as for helping someone buy a house at £600,000 that shows the true colour of this government.

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  • Charlespk  |  March 21 2013, 2:42PM

    Until there's a house price 'correction' nothing will change. . Only two things with cause that correction. . 1. Much higher general inflation (prices AND wages) So the number (house sale prices) stay the same but the REAL values fall markedly. OR 2. A return to Base Rate at the current inflation level so forcing mortgage default, negative equity and property being returned to the market for sale by auction.(very painful) IMO, higher inflation is the only thing that will bring the massive equity held in property back into the general economy and start to stimulate general commerce and growth again any time soon. (Devaluation by any other name.) The alternative is this painfully slow recovery that is just protecting the lenders who still pay themselves big bonuses. We've been here before only this time we've got the added corrosive cost of rocketing energy prices. The new Bank of England Chairman may have similar ideas, but he won't be as forthright.

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  • Free2opine  |  March 21 2013, 1:50PM

    Whoops, too many plugs in that sentence.

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  • Free2opine  |  March 21 2013, 1:49PM

    What a pity that this reporter has lost the plot. The reality of this pie-in-the-sky proposal will only add to the problems we now have with housing. House prices and rents will rise instead of the levelling which is what is required to help people get onto the bottom rung of the ladder. There are at present emergency talks going on within the Chancellors advisory group to plug the hole whereby second home-buyers and buy-to-let buyers are able to plug into this very ill-thought out decision.

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  • 28daysearlier  |  March 21 2013, 12:38PM

    Yesterday Danny Alexander wasn't able or willing to say how many new homes this policy would get built. The Office for Budget Responsibility are so uncertain about this policy they allocated a zero growth effect in the budget projection. As always the devil is in the detail. Both schemes offer help to people buying homes for up to £600K Should the state be underwriting house loans for people able to buy a house worth £600K? Also Osborne was interviewed by Eben Davies on the Radio 4 Today Programme and specifically asked if the mortgage guarantee scheme would would allow people to buy a 2nd (or more) home. He wouldn't/couldn't answer the question. The last thing Cornwall needs is more 2nd homes yet it's possible that this Lib Dem/Tory scheme seems to encourage It.... So in summary...help for people that can afford 600k homes and help for people to buy a 2nd home...great! http://tinyurl.com/c4zwqvc the question was asked at around 2:20 into the broadcast. Surely IF you care about the housing shortage putting money into building new social housing would provide an immediate boost to the construction industry and provide homes for people in dire need. The private sector will not solve the housing crisis...we need to stop selling social housing and build more.

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  • toffer99  |  March 21 2013, 12:01PM

    Chop benefits for the needy, tax disabled people's spare bedrooms. Give millionaires a £100,000 tax cut and subsidise their mortgages so they can buy second homes in Cornwall depriving locals of the opportunity to buy. Thanks Osborne, thanks Cameron. That's a good definition of "stamping on the faces of the poor".

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  • conundrum  |  March 21 2013, 10:33AM

    This article, like Osbourne and most of the Government , is dangerously disconnected from the day to day reality that most of us experience. So 'struggling home buyers' will be 'offered hope'?.....people who are fighting rising prices, falling wages, shrinking public services, and working in an economy where in both the private and public sectors they can lose their jobs tomorrow, are being encouraged to take on a massive debt in the form of a 95% mortgage (and presumably just keep their fingers crossed that interest rates don't rise.) Let's face it, A mortgage is basically where you pay the bank £3 for each £1 you borrow, so if you're lucky, after working for most of your life you get one house....and the bank gets two. You may think that the money they lend you in the first place is someone else's savings, it's not: it doesn't exist, it's created out of thin air with a few key-strokes. But the cash you have to pay them back will be earned the hard way. And don't forget: The State will probably get most of it back in the end anyway, when you have to sell it to pay for your care. Err.....remember the sub-prime crisis George? This principle is what created the financial crisis that all of us ( except wealthy people like the Chancellor and his friends) are being told is the reason for 'Austerity.' In fact Austerity is just an excuse, it's deliberately designed to enable a very small minority to get their hands on the remaining public assets they haven't already confiscated /privatized (The NHS for example) and to allow even more private profits to be made from the rest of us. This is just more of the same, because it's going to be paid for by......yes, you guessed it..... the tax-payers.... that's us by the way. Yet another way of channeling even more money into the banks and conning ordinary people into unmanageable debt so they'll have to work even harder and longer to pay it back. What could possibly go wrong? An a whole shiny penny off a pint for us plebs eh?..... Gawd bless 'ee sir, now that's wot I really calls an eye-catching give away! ( doffs imaginary cap respectfully )

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