Stamp duty threshold raised

The stamp duty threshold has been temporarily raised to £175,000 as the government attempts to kickstart the stagnant housing market.

The increase applies to all purchases from tomorrow (September 3rd) for one year when it will then be reviewed. The announcement forms part of a package of measures being announced by the government today to help first-time buyers and revive the property market.

Other measures are expected to include government approved sale and rent back schemes to stop those in the most danger of defaulting on their loans having their homes repossessed.

Communities and local government secretary Hazel Blears this morning told BBC Breakfast News that spending money now to avoid families having their homes repossessed was preferable and less expensive than having to house them after this had happened, when they risk being made homeless.

Reaction to the annoucement has been mixed with several organisations having been taken by surprise by the move.

Sue Anderson, a spokeswoman for the Council of Mortgage Lenders, said the organisation was still assessing the impact of the announcement, adding that it looked as if the majority of homebuyers would still have to pay the tax.

She said: "Although it is a welcome move in that it aleviates some of the problems with house purchase one unintended consequence might be that first time buyers still hold off and then come back to the market just before the deadline next year".

But David Hoolingworth, of mortgage brokers L&C, welcomed the announcement. "It is easy to to criticise this move but it is better than doing nothing. For those people looking to buy property it will be a not inconsequential incentive. But if you ask me if it will revive the housing market over-night, I doubt it," He said.

Mr Hollingworth added: "To provide a one per cent incentive is perhaps not enough to tempt that many first-time buyers back to the market".

The annnouncement appears to clearly target first-time buyers who have always kept the housing market stimulated by allowing existing homeowners to move up the property ladder. But Mr Hollingworth also said stamp duty, despite the housing market's calls for it to be reformed, was not the real problem and not the over-riding factor affecting people's decision about whether or not to buy a home. He said while saving £1750 was not an inconsiderable incentive many first-time buyers might still stay away from the housing market while property prices appeared to be in freefall.

Meanwhile Ray Boulger, senior technical manager at mortgage broker John Charcol, said a suspension of stamp duty on properties worth upto £175,000 was "absolutely not the answer" to the problems the market and homeowners alike faced. "The housing market has spluttered through the last few months with indecision on whether there would be a redefining of stamp duty clearly costing the wider economy. Yes, it will help a small minority of people, but the issue lies more with mortgage lenders and their ‘shut up shop’ attitude to lending above certain loan-to-values. The government needs to address this situation above all others," he added.

Mr Boulger also questioned whether the government had "truly thought this through" arguing that a a total suspension of stamp duty would have cost the government less than £2 billion a year which he said would have had a much greater as a stimlus package for the housing market.

Conservative shadow chancellor, George Osborne, said yesterday the opposition would look at the details of the government's proposed housing measures and support those that would work.

"But let’s be clear, they are not going to help the vast majority of families facing a rising cost of living and falling house prices," he added.

"Nor do they amount to the first instalment of the economic recovery plan we were promised.

"I suspect that what we will see in the coming weeks is a desperate and short term survival plan for the prime minister rather that the long term economic plan the country needs."

Meanwhile Liberal Democrat leader, Nick Clegg accused the prime minister of attempting to save his job rather than the economy.

He said: "If the prime minister really wants to help people on low and middle incomes he could take the simple and obvious step of cutting their taxes, releasing billions of pounds to boost the economy.

“Under Labour, the poorest are feeling the pain of Gordon Brown’s legacy as chancellor, while the richest take advantage of numerous loopholes to avoid paying their fair share.

“The government’s response is to try to bribe people into buying houses in a falling market. The last thing vulnerable first time buyers need is Gordon Brown sucking them straight into negative equity with the housing market in free-fall."