IT contractor mortgages could be amongst those to suffer if George Osborne pushes ahead with the Government’s plan to impose a windfall levy on the banks.
The major banks have warned that such a move could lead to tens of billions of pounds less being available to homebuyers and small businesses.
Senior banking executives say that the extra tax would leave them with less money to put aside as capital reserves, thus reducing their ability to lend.
Gross mortgage lending fell dramatically during the economic crisis. In 2007 it was £362bn, but by last year the figure was just £143bn. Top bankers argue that even a modest levy could reduce mortgage lending by up to £60bn.
The Conservative Party manifesto promised to impose the levy and the Chancellor is expected to unveil his plan in the emergency budget on 22 June. But the levy seems to be at odds with Vince Cable’s plans to force the banks to make more funds available for small business loans.
Any reduction in contractor mortgage lending will be bad news for the housing market but first time buyers could face even greater problems. Many choose to rent a property whilst saving for the deposit they need to obtain a mortgage. But rents are now soaring as the already struggling buy to let market worries about proposals to increase the CGT rate.
Fewer rental properties are coming onto the market and in the last few weeks average rents have increased by up to £10 a week in popular areas. In some areas, the number of available rental properties has dropped by 60%.
An increase in CGT might also cause landlords to remortgage as an equity release measure instead of selling. Again, this would reduce the number of homes available to prospective buyers.
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Image: 337/365: The Big Money by lDavid D Muir
