As was anticipated last week, on Wednesday 3rd September Gordon Brown launched a “rescue package” with the joint aims of helping consumers and reviving the housing market. As part of the package Brown has scrapped stamp duty on properties costing £175,000 and under, and has promised help to those who are at risk of repossession by proposing a shared ownership scheme between tenants and local councils/housing associations.

These measures have received much attention in the press this week, so let us now review what Brown’s proposals entail and whether they will help consumers, along with the other top money stories for the week beginning 1st September 2008.

Wednesday 3rd September:

Stamp duty slashed – As part of the reform package proposed by Brown, stamp duty on properties priced at £175,000 or under, has been removed for the next 12 months. But, what exactly is stamp duty? Stamp duty is all to do with property prices. For example before Brown’s new plan was introduced if you were to buy a property on the market for anything over £125,000 you would be required to pay a tax (stamp duty) between 1% and 4% of the purchase price. Yet now, anyone buying a house for under £175,000 will be exempt from paying the tax. At first glance this is good news, and has been introduced to encourage first time buyers into the market. However, as house prices have fallen dramatically in the last months, it has been suggested that a maximum saving of £1,750 will not provide too much of a temptation for first time buyers, as they may well wait to buy as they anticipate house prices to fall further. Also coupled with this is the difficulty of obtaining a mortgage- for even if potential buyers can save £1,750 if they cannot get a mortgage they will not be able to take advantage of the saving.

HomeBuy Direct scheme introduced – The second measure of the reform package aims to help those that are at risk of repossession by the means of a shared ownership scheme. Homebuy Direct entails that the tenant, or would-be tenant, of a property can buy a share of their home and then the remaining share of the property will be loaned to the tenants, with the opportunity to buy more of the property, as and when the tenants wish.

If you are considering buying a home then make sure you fully research the range of options available to you. The HomeBuy Direct scheme has been estimated to have a helping effect on 10,000 individuals or couples, so it is definitely an avenue worth investigating.

Pound falls against the dollar- The value of the pound has fallen steeply, reaching its lowest level since April 2006. The strength of the pound can be seen to be in decline as in July one pound would buy two dollars, however now one pound is buying $1.77. Although a weakening pound is not good news for the strength of the economy, it could serve to help British manufacturing as UK exports will appear cheaper to overseas buyers.

Thursday 4th September:

Food prices rise by 8.3% – An index compiled for the BBC by retail analysts Verdict Research has shown that food prices in the UK have increased by 8.3% since January 2008. This research paints a similar picture to the estimates of the British Retail Consortium (BRC), who pitch food price inflation at 10%. These hikes in food prices have not affected all foodstuffs in the same way. For example, the prices of meat and fish have risen by 22.9% whereas frozen foods have increased by 5.8%. These price increases will squeeze consumers’ budgets even more, as food price increases are exceeding the rate of inflation, which the Consumer Price Index (CPI) put at 4.4%. As food prices rise, it’s important that we all stay on top of our budgets, if you’re feeling the pinch Moneybasics has the tools available to help you identify the areas of your spending that you could cut down on.

Interest rates remain at 5% – The Monetary Policy Committee decided to leave interest rates unchanged at 5%, as they met on Thursday. Although there were hopes of a cut in interest rates, the fact that analysts forecast inflation will reach 5% in the coming months meant that interest rates maintained the status quo.

Prepared for Moneybasics by Jo Parsley, Advocacy Officer (Credit Action).