CHANCELLOR DELIVERS BUDGET 2021

The chancellor Rishi Sunak delivered his Budget yesterday in which he announced £65 billion in spending over the next two years to support jobs and investment as part of the economic recovery from the pandemic, followed by tax rises on businesses and individuals in the middle of the decade (Financial Times, p1, £; The Times, p1, £; The Guardian, p1; £).

In his speech to Parliament Mr Sunak said that the government will review the current eight per cent bank surcharge later this year 'to make sure this important industry remains internationally competitive? (Financial Times, p8, £). Mr Sunak also announced that a new government-backed loan scheme for businesses, the Recovery Loan Scheme, will launch on 6 April, replacing the current programmes which ends later this month (Daily Telegraph, Budget p5, £). Under the new scheme, businesses will be able to borrow between £25,001 and £10 million, with lenders receiving an 80 per cent guarantee from the state.

The Stamp Duty holiday, which was due to end this month, has been extended until the end of June (Daily Mail, p14). The stamp duty threshold will then reduce to £250,000 until 30 September, before returning to the previous level of £125,000. Meanwhile a new mortgage guarantee scheme was confirmed, with the government providing a guarantee to lenders on mortgages with a five per cent deposit on mortgages on homes worth up to £500,000 (Daily Telegraph, p9, £).

The chancellor also announced yesterday that the legal limit for contactless transaction will increase to £100, with the industry due to implement the changes later this year (the I, p29).

Responding to the Budget, David Postings, Chief Executive of UK Finance, said: 

?The Chancellor has set out a bold plan to support the economy in today's Budget. The banking and finance industry has taken unprecedented action over the last year to support businesses and customers, and we will continue to work closely with the Government to help the nation get back on its feet. This is a well-constructed Budget that positions the UK as an open and internationally competitive place to do business and we welcome the measures set out by the Chancellor to achieve this vision.?

HOUSE PURCHASES IN Q4 2020 STRONGEST IN 13 YEARS

House purchase lending in final quarter of 2020 grew to the highest quarterly levels since 2007, led by December levels 31 per cent higher than seen a year earlier, according to UK Finance's latest Household Finance Review. Overall, mortgage lending was lower in 2020 than in 2019 as a result of the decline in lending in the second quarter. Applications data point to a likely slowing in house purchase activity later in 2021 once the stamp duty holiday has ended. Meanwhile remortgages with equity withdrawn have become more popular in Q4 2020, with the average value of money withdrawn increasing, driven by use for deposits for second homes, new buy-to-let (BTL) properties or to assist with deposits for children buying their first properties.

The support measures in place from industry and government meant that Q4 saw only modest rises in arrears and minimal possessions, in line with earlier 2020 trends. While credit card lending slowly increased, personal loan borrowing fell and deposits increased further to record highs as households remain cautious against an uncertain economic outlook.

Eric Leenders, Managing Director, Personal Finance said:

?Homebuyers looking to take advantage of the stamp duty holiday were behind the housing market's strongest quarter for purchases in 13 years, in the final quarter of 2020. Despite this uptick in activity, annual purchases for the whole year were around a tenth lower than the previous year, due to a complete shutdown of the market in the first lockdown. 

?The stamp duty holiday helped to boost activity at the end of 2020, and it is likely many of these purchases have been brought forward in order to take advantage of the savings. The chancellor's announcement in the Budget to extend the Stamp Duty holiday until the end of June before then phasing it out will prevent a cliff edge, reducing the risk of house sales collapsing and will prove beneficial for all parties involved in the housing market.

?There were some signs of increased consumer confidence in unsecured borrowing, with credit card spending growing during the quarter, however this was mixed with the continuing economic uncertainty and further lockdown restrictions which led to a decline in new personal loans.

?The payment deferral schemes, which were in place for most of the last year, have helped millions of customers impacted by covid-19. The plans to gradually ease the lockdown restrictions over the coming months will be a welcome sight for many. However, we know that some customers will still be struggling and the industry is continuing to provide tailored support. Anyone who is facing payment difficulties should contact their lender as soon as possible to get the help they need.?

NEWS IN BRIEF

The Bank of England's monetary policy should ?reflect the importance of environmental sustainability and the transition to net zero?, the chancellor announced yesterday, with the Bank saying it would adjust its approach to corporate bond buying as a result (Financial Times, p4, £).

A new UK infrastructure bank is to be established in Leeds with the government expecting it to deliver ?at least £40 billion? in investment to support the UK's target to reach net zero emissions by 2050 and to support regional and local economic growth (The Times, Budget p7, £).

New car registrations fell by about 36 per cent year on year in February, the lowest level in the month since 1959, according to preliminary figures from the Society of Motor Manufacturers and Traders (Reuters).

Interest rates could be reduced to up to two per cent below zero without material side effects, according to analysis by the International Monetary Fund, although the authors suggest that the impact might be more severe than the current evidence suggest (The Times, p38, £).

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