The chairman of the Institute of Directors inthe West Midlands has urged the Government to come up with some creative ways of helping homebuyers.
Richard Boot said concessions on stamp duty might be the answer, but separate interest rates for business, mortgages and credit cards, which some have advocated, was probably not the way forward because too many people would look to cheat the system.
Mr Boot, speaking prior to the decision by the Bank of England to keep interest rates at five per cent, said he had originally been an advocate of cutting the cost of money in a bid to get the economy moving.
However, he said he had come round to the view that it was better to squeeze inflation out of the system for fear it would fuel wage demands and damage savings.
“The danger is of inflation creeping back,” he cautioned. “It is perhaps better to go through a bit of pain now in the hope that, with oil prices coming off their highs, the outlook will be better in six months.”
But the housing market could not wait that long, he added.
“The Government should look at some focussed initiative where interest rates are creating a problem. They should in particular be helping first time buyers and there should be scope for the Government to do something on stamp duty.”
Shared ownership schemes might be another fruitful area, suggested Mr Boot.
Saying the Government should take action rather than just allow further falls in the housing market, Mr Boot went on: “It should talk with the banks and come up with some sort of package to address the issue. They need to be creative and offer help at ground level.
“There is a massive housing need in this country yet nobody is buying because the market is so tight.”
As to a three-tiered interest rate set-up Mr Boot said issues of practicality were the difficulty.