It is expected to help more than a million first-time buyers get onto the housing ladder in the next five years.
The cut will be for all stamp duty for first-time buyers for properties up to £300,000. It will also apply to the first £300,000 for properties worth up to £500,000 purchased by first-time buyers.
Delivering the Budget he said this would bring: “A stamp duty cut for 95% of all first-time buyers who pay stamp duty. And no stamp duty at all for 80% of first time buyers from today.”
According to HM Treasury, as a result of these changes:
- in every region of England outside London, and in Wales and Northern Ireland, the average first-time buyer property will pay no stamp duty;
- the stamp duty bill of the average first-time buyer in London will nearly halve, from £10,500 to £5,500.
It will cost £125m this year, and is expected to total £3.2bn by the end of 2022/23.
The cut had been well trailed over the last month with the expectation that the chancellor would look to make home ownership easier for first-time buyers in a bid to target younger voters.
However, experts from the London School of Economics suggested stamp duty cuts targeted at older homeowners could have a more far-reaching impact on the housing market.
Last month it was revealed that the increases to stamp duty had resulted in a £2bn increase in tax revenue during the three months to October.
Halve the bill
Coreco director Andrew Montlake said many of the brokerage’s first-time buyer clients would be cheering this change as they calculate the savings that they will make on buying their first property.
“For some this could well be the difference between purchasing a property or not, especially in high demand areas like London,” he said.
“This will almost halve the bill for the average FTB in London and provide further encouragement that the dream of owning their own home has been made slightly easier.
“However, this change does not help home-movers who are increasingly being put off moving due to spiralling costs and the important ‘downsizer’, the last time movers who will free up valuable housing stock and help unblock the system.”
Montlake added that it was important this did not have any unintended consequences and that the government had real intentions of building more houses.
“We also have to guard against the potential for house prices to simply rise further to negate this gain, so while this is a welcome move, on its own it does not deal with the more serious issues facing the housing market and the lack of real, affordable homes available in the right areas,” he continued.
“Whether the overall housing packages announced leads to anything more than a feigned determination of the government to build more remains to be seen.”
For all Mortgage Solutions’ Budget coverage on the Budget including the boost for small business click on the links.
The government has also launched a fintech competition to make rent history count toward mortgage affordability, changes to rental benefits and the Chancellor’s speech in full.