The recent cut in stamp duty has been welcomed by some industry experts, as UK house prices continue to rise against the odds. The measures were announced as part of the new Chancellor Kwasi Kwarteng’s mini-budget, which aims to boost economic growth by lowering taxes.
The reduction in stamp duty, which will see the threshold on which tax is paid on property purchases rise from £125,000 to £250,000, is expected to revive the housing market, which was beginning to show signs of cooling off, after the pandemic stamp duty holiday ended in September last year.
First time buyers will now pay no stamp duty on the first £425,000 of a property purchase, which is raised from the previous threshold of £300,000. For those further up the chain, the portion from £250,001 to £925,000 will now be taxed at 5%, and the portion from £925,001 to £1.5 million will be taxed at 10%. The portion above this will be taxed at 12%.
Commenting on the stamp duty cut, Nathan Emerson, CEO of Propertymark, said: “The rebalancing of the thresholds for which stamp duty is paid, in particular for first time buyers is long overdue to catch up with house prices which have risen at an extraordinary rate.”
“We did hope that stamp duty for downsizers or last time movers would have also been reviewed to release the latter part of the market, which when blocked stops movement further down for second steppers and first-time buyers, causing stagnation as buyers have nothing to move on to.”
The government have confirmed that the changes will be permanent, rather than a holiday, so it is hoped that some of the frenetic activity on the housing market that was seen during the 2020/21 cut will be avoided. Nonetheless, some experts are anticipating more interest, as demand continues to out strip supply.
Rightmove director of property science Tim Bannister said: “Friday’s announcement is likely to stimulate some more demand (in the housing market). If it does lead to a big jump in prospective buyers competing for the constrained number of properties for sale, then it could lead to some unseasonal price rises over the next few months.”
However, not everyone is so optimistic in their outlook. The Guardian reports that almost 300 mortgage deals have been pulled from the market in the wake of the falling value of the pound. Some commentators also expect that the stamp duty cut won’t be enough to stave off a dramatic house price crash, as high mortgage repayment rates kick in.
Some homeowners will see their mortgage payments double, once their current fixed rate deals come to an end next year, as over 1.8 million deals will do so. Anyone who is on a fixed rate deal is advised to shop around six months before it is due to end, and seek advice from an experienced mortgage broker who can keep up with the rapid changes in the market.
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