THE government has announced a cut to stamp duty in a bid to boost the property market.
Chancellor Kwasi Kwarteng made the announcement in the House of Commons today as part of a raft of economic reforms.
It is hoped cutting the levy will encourage growth by incentivising more people to move property and get more first-time buyers on the housing ladder.
The announcement means no stamp duty will be paid on the first £250,000 of any property, up from £125,000.
For first-time buyers the threshold is now £425,000, up from £300,000.
The maximum value of a property on which first-time buyers’ relief can be claimed will also rise from £500,000 to £625,000.
Experts have said the cut could see house prices go up.
What is stamp duty?
Stamp duty land tax (SDLT) is a lump sum payment you have to make when purchasing property over a certain threshold.
You pay the tax when you:
The rate a buyer has to pay depends on the price, type of property and whether or not they already own a home.
Will the stamp duty change affect house prices?
The last time the government announced a cut to stamp duty after the coronavirus lockdown, it created a mini-boom in the property market, pushing house prices up by 8.5% on average.
So a further cut to the levy could see house prices go up again, despite the average home being worth £292,118.
Joe Garner, managing director at property developer NewPlace, predicted the stamp duty cut would see house prices go up.
“Introducing a cut to stamp duty five weeks prior to the deadline for help-to-buy loans is likely to see a mass surge of last minute transactions, followed by a huge drop-off after the deadline ends.
He added: “It is likely to be the final push on the pump that sees the housing price bubble burst.”
Meanwhile, Edgar Rayo, chief economist at finance broker Finanze, said the stamp duty cut combined with the Bank of England’s decision to hike interest rates from 2.25% from 1.75% would raise house prices by 3 to 4% by the end of the year.
Karen Noye, mortgage expert at Quilter, stopped short of saying a stamp duty cut would stop house prices from rising, but that it would stop them from dropping from such highs.
She said: “It may be enough to quell potentially dropping house prices with people staying put and avoiding moving costs in the face of the energy crisis, double digit inflation and soaring food costs.
“Buyers could once again be tempted to move despite the economic backdrop.”
Our mortgage payment calculator can help you work out how much you can afford to borrow to buy a home.
And our My First Home series reveals each week how first-time buyers have got a foot on the ladder – like the two best friends who teamed up to buy a £505,000 first home.