Mixed response to Stamp Duty changes

2 September 2008

The Chancellor’s announcement that no Stamp Duty is to be charged on house purchases worth £175,000 or less for the next year has met with a mixed reaction.

Mr Darling raised threshold at which the 1 per cent purchase tax becomes chargeable, from £125,000 to £175,000, as from 3 September.

Stamp Duty now applies at 1 per cent to properties worth between £175,001 and £250,000, while the rate for properties between £250,001 and £500,000 stays at 3 per cent, and for those costing over £500,000, it is still 4 per cent.

The Treasury said the relief on homes worth less than £175,000 will apply to transactions with an effective date on or after 3rd September 2008 and before 3rd September 2009.

The measure has been welcomed by mortgage lenders.

A spokesperson for the Halifax described it as “a sensible measure” that will help the housing market which has seen sales slump and prices plummet this year on the back of the credit crunch.

Building firms, who have been hard hit by the stagnation in the market, recorded sharp rises in share prices immediately after the announcement.

However, some in the housing industry have expressed scepticism over the real value of the change.

Sue Anderson of the Council of Mortgage Lenders thought that the stamp duty land tax measure wasn’t radical enough.

Ms Anderson said: “While any initiative to try to help the housing market is welcome, this particular move doesn’t go far enough in terms of the starting threshold and it is also getting close to the £250,000 threshold.

“The level of transactions this year is lower than last year and, while it means that around 40 per cent of transactions won’t be caught, it is questionable whether it will incentivise buyers who wouldn’t have entered the market anyway.”

The average price of a home in the UK currently stands at £164,000, although some lenders put it as much as £10,000 higher.

Ray Boulger, of mortgage lender John Charcol, said he believed the change would encourage only those buyers who had put off purchasing a home in case there was a change to the stamp duty thresholds.

Mr Boulger commented: “The gap between the thresholds is now ridiculously small, and I think people will be even more reluctant to pay over the £250,000 mark.”

The National Federation of Builders pointed the finger at the reluctance of banks to lend as the real source of the problem.

Their spokesman, Roger Humber, said: “The proposals do not address the core problem, which is the collapse in mortgage availability. This is what has triggered the crisis for first-time buyers and led to low levels of housebuilding and rising unemployment in a housing market operating 70 per cent below last year’s level.”

As well as introducing the stamp duty change, the government launched a series of further initiatives aimed at helping first-time buyers and supporting owners who are finding it difficult to meet their mortgage payments.

Those facing repossession will be able to sell their homes to local councils or social housing landlords and then rent the property back at an affordable rate.

A new scheme, called HomeBuy Direct, will offer first-time buyers with a household income of less than £60,000 per year loans free of charge and worth up to 30 per cent of the value of the property. After five years, a fee would be chargeable on the loan.