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Pre-budget statement only offers modest relief for UK property market

According to analysts Jones Lang LaSalle it gives only a little more room to fund mortgage repayments and help stave-off further repossessions and arrears.

The three month grace period being granted to homeowners facing repossession, for example, will be of comfort for such homeowners and will also benefit the wider marketplace, they said, but this will only have a modest impact overall.

'This action will cause a delay in repossessions and should reduce the total number as some will escape repossession altogether. Additionally, the negative impact of repossessions on the housing market will be diminished and the overall number of properties on the market should also be lower as a result,' said Neil Chegwidden, Head of Residential Research at Jones Lang LaSalle. But he added that it would not transform the property market.

The Council of Mortgage Lenders said the detail of the initiative will be important as it is concerned that it may postpone rather than change a lender's decision to seek possession.

What may be of more benefit, the CML said, is the modest improvements to the Income Support for Mortgage Interest scheme and it called for it to be extended. It believes that further support through this scheme will be necessary and it should be included in the 2009 budget.

It also urged the government not just to look to individual banks to improve lending to property buyers but across the entire lending industry.

'Everything announced yesterday is helpful, if modest. But it is vital to recognise that not all lenders are the same, and not all have received support from the Government's interventions in what remains a very difficult financial and economic environment,' said Michael Coogan, CML director general.

'This has a direct bearing on the extent to which they are able to deliver the Government's multiple aspirations to increase the flow of new lending, be more lenient to borrowers in arrears, and improve their individual capital position,' he added.