Government reforms Stamp Duty
The new measures, which will come into force at midnight, mean borrowers will no longer have to pay huge increases in tax when house values enter a new band.
Homebuyers will pay 0% on the first £125,000, then 2% to £250,000, 5% to £925,000, 10% to £1.5m and 12% above that level in a similar system to income tax.
The Chancellor said that 98% of buyers will see their taxes reduced due to the cuts, while the CML calculated that 1.5% will pay more tax under the new system.
Paul Smee, CML director general, said: “This fundamental reform has been a long time coming, but better late than never.
“Although there are losers as well as winners, the vast majority of mortgaged transactions will benefit from lower tax as a result of this move.”
And Paul Broadhead, head of mortgage policy at the BSA, said: “This is the year that the Chancellor has pulled a real rabbit out of the hat and gone for it on Stamp Duty.
“We have been calling for this reform for years and the best I was hoping for was a consultation.
“So the announcement of a fully worked through proposal, effective from midnight tonight was a massive but welcome surprise. “
He added: “The single disappointment was that the opportunity to raise the bottom £125,000 band up at least in line with inflation was not taken.”
People buying properties for more than £937,000 will pay more Stamp Duty under new rulings. But according to e.surv chartered surveyors director Richard Sexton it will act as an “olive branch for aspiring first-time buyers and may help spur more activity at the bottom of the market”.
Legal & General Mortgage Club director Jeremy Duncombe thinks that while Stamp Duty will help boost affordability, what the government really needs to focus on is a “dedicated programme of housebuilding”.
He said: “In order to stop house prices from escalating and allow the market to grow healthily and sustainably, we need to see a significant increase in housing stock across the UK.
“Yesterday’s announcement of a new garden city in Bicester will help towards this, however there is still more to be done.
“These are all steps in the right direction, but as we go into another election year, house building and affordability still remain very much on the political agenda.”
The immediacy of the changes have come under scrutiny. Jonathan Harris, director of mortgage broker Anderson Harris, added: “’We would have liked to see an amnesty for those who have made a decision to buy based on current legislation.
“What does it mean for people who don’t have the extra cash they are now required to pay?
“We have clients nearing exchange who won’t be able to achieve it before the deadline. Given a week or two amnesty, things would have been different.
“Doing it practically immediately is not fair as it will hit some people hard who are part way through a transaction but not able to exchange by midnight.”