Stamp duty hits 85%

Gordon Brown's efforts to increase the stamp duty threshold have had little effect, new figures show.

In an attempt to help first-time buyers and responding to pressure from consumer groups, the chancellor doubled the stamp duty threshold in 2005.

But this increase was still not enough to compensate for rising house prices, and in the last year alone the percentage of first-time buyers paying the tax has increased from 48 per cent to 56 per cent, according to the Council of Mortgage Lenders' (CML's) latest monthly statistics.

Additionally, some 85 per cent of the people moving home in August paid stamp duty, compared with 74 per cent a year earlier.

But the CML is mainly concerned about the plight of first-time buyers - as house prices have continued to rise and now mortgage rates have been increasing as well.

First-time buyers made up just 35 per cent of the market in August, the lowest proportion since the CML started its current survey in April 2005.

And properties are becoming less affordable.

The average first-time buyer mortgage remained at 90 per cent of the property value in August, but income multiples rose to 3.27, up from 3.24 in July and 3.08 in August last year.

Additionally, the proportion of income first-time buyers are spending on their mortgage interest payments increased to 17.1 per cent - the highest level since February 2005, with the size of a first-time buyer mortgages increasing twice as fast as first-time buyer incomes.

And despite the threat of interest rate rises to come, fewer people are taking out fixed-rate loans.

Fixed-rate mortgages still make up 60 per cent of new loans, CML figures show, but this is well below the peak of 76 per cent in November and December 2005.

By contrast, tracker-rate mortgages now make up 25 per cent of new loans, the highest proportion on record.

"Interpreting these figures suggests that borrowers are falling into two camps," said CML director general Michael Coogan.

"There are those who believe rates are near their peak, and who are confident enough to risk a short-term rise in rates for the pricing benefits offered by discounts and trackers.

"And there are those who want greater financial certainty, who may well be increasingly choosing longer-term periods over which to fix their rate." XXX