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UK House prices predicting general election result

Nationwide Calls On Gordon Brown to Make a Difference on Housing and Savings As He Moved to No 10

Personal_Finance / Savings Accounts Jun 26, 2007 - 09:35 PM GMT

By: Nationwide

Personal_Finance

Nationwide Building Society has challenged Gordon Brown to put hard-pressed home buyers and savers at the top of his agenda through real reform that will make a genuine difference. During Mr Brown's ten-year tenure as Chancellor he has made some significant changes, including the introduction of the Child Trust Fund and increases to stamp duty thresholds. However, Nationwide continues to believe there are some major concerns that still need to be addressed. As he enters No. 10 as Prime Minister on 27 June, Nationwide Building Society calls on Gordon Brown to:

  • Ensure fair tax treatment for all child savers
  • Provide more help for hard pressed home buyers
  • Increase the limits on annual ISA savings

Fair tax treatment for all child savers – nine million children are missing out

Nationwide wants to see the government introduce fairer rules on tax-efficient savings and investments for children. The Society estimates that, although children can open a cash ISA at 16, as many as nine million youngsters in the UK aged under 18 are too old to qualify for a Child Trust Fund (CTF), but too young to invest in an ISA.

This means that parents who want to save for a child who is too old to qualify for a CTF will find that as the cash sum grows, they will become liable for tax on interest earned above their personal allowance on the investment. This could be costing parents nearly £129 million* a year.

Nationwide believes this two-tier system, which can see siblings treated differently in tax terms, is unfair and wants Gordon Brown to equalise tax treatment for children, allowing families to save for the future without being penalised.

Help for hard pressed homebuyers – affordability and rising house prices

Over the last decade, affordability of property in the UK has deteriorated significantly – house prices have increased by 215% and initial mortgage payments, as a percentage of take home pay, have more than doubled (around 22% in 1997 compared to 45% today). In addition to this, the cost of stamp duty has increased enormously. Back then, the typical house price was £58,196 which was below the £60,000 stamp duty threshold at that time. Today, homebuyers face a stamp duty bill of over £1800, based on a typical house price of £181,584.

Nationwide would like to see more help for hard-pressed homebuyers. As property prices continue to rise, an increasing number of people are victims of high levels of stamp duty. Nationwide believes that the burden of stamp duty should keep pace with rising house prices and calls on the Prime Minister and his Chancellor to link stamp duty limits to house price inflation. If the stamp duty threshold had been raised in line with house price inflation since 1993 it would now stand at £210,000, instead of the current figure of £125,000.

Increase annual ISA limits to £9,000 for all

Nationwide is calling on Gordon Brown to increase the limit on annual ISA savings from the current level of £7,000 to £9,000 – the same amount that could be saved in its predecessor, the TESSA, which was replaced by the ISA in 1999.

Until the 2007 budget, ISA limits had not been increased at all in the eight years since they were introduced. The increases announced are marginal and the lack of substantial increase currently means that the £7,000 limit that a saver can invest in a maxi-ISA is now worth an equivalent investment of around £5,500 in real terms and the £3,000 cash-ISA ceiling around £2,500. One in three people benefit from the tax-efficient incentives of ISAs and the initiative is a success story, however the tax breaks for saving simply aren't worth what they used to be and the Society would like to see the Prime Minister redress the balance and restore the limits to their true value.

Stuart Bernau, executive director at Nationwide , says: “Gordon Brown, the Chancellor, introduced Child Trust Funds and raised the thresholds of stamp duty – but we think he can do much more as Prime Minister. We call upon him to take a stand and make significant changes to show that the nation's new Prime Minister is committed to making a difference.

“Nationwide has long-campaigned on issues important to its members and hopes the Prime Minister, with his experience as Chancellor, will see that he can make a real difference to family finances by linking stamp duty to house price inflation, giving the same tax breaks to all child savers and increasing the limits on ISAs. Helping savers and mortgage borrowers would give a clear signal to the country that he is committed to helping family finances.”

Notes

Average house prices are produced using Nationwide's updated mix adjusted House Price Methodology which was introduced with effect from the first quarter of 1995.

* Nationwide has calculated this figure based on figures from its own SMART account where balances exceed £2,020 and on the basis that it represents one sixth of the total children's savings market it has multiplied these figures six-fold.

For further information:

Katie Harper, media relations manager, telephone: 01793 656215
Charlotte Sjoberg, campaigns manager, telephone: 01793 655189


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