Lenders regret stamp duty decision

Lenders regret stamp duty decision, report the Council of Mortgage Lenders.

Related topics:  Mortgages
Millie Dyson
30th November 2011
Mortgages
Lenders acknowledge the pressures on public finances and the chancellor’s limited room for manoeuvre but are nonetheless disappointed that the government has decided not to extend the current first-time buyer stamp duty concession, due to end in March next year.

Although we accept that the concession did not appear to have created additional demand, it has been a significant help to those first-time buyers entering the market.

Removing it next spring runs counter to many of the themes in the government’s recently published housing strategy, including measures to make higher loan-to-value mortgages more readily available.

That will help some first-time buyers, but the restoration of stamp duty requirements would put back in place another hurdle for them.

As the government argued in its announcement last week of the mortgage indemnity scheme, the housing market can be an important engine for growth in the economy.

But for that to happen, the government needs to continue to deliver a clear and encouraging message to buyers, as well as builders and lenders.

First-time buyers would have benefited from the re-assurance that the government supports them as they take their first steps into a housing market in which there is a strong need to restore confidence.

Our analysis shows that the previous stamp duty concession, which came to an end in December 2009, was preceded by a spike in sales and followed by a corresponding slump.

We believe that the decision to withdraw the current exemption next March could produce a similar pattern.

The cost in foregone revenue of continuing the concession would only have been modest, given the current low number of transactions.

It was also a stated intention – albeit by the former Labour government – that the cost of the first-time buyer concession would be offset by the new permanent stamp duty rate of 5% on properties purchased for more than £1 million, which came into effect in April.

We continue to believe that there is a strong case for much more fundamental, longer term reform of stamp duty, removing the way in which it is currently levied at the highest rate on the whole price paid for the property.

In our view, that form of levy should be replaced with a marginal rate system, like income tax. 
More like this
Latest from Property Reporter
Latest from Protection Reporter
CLOSE
Subscribe
to our newsletter

Join a community of over 30,000 intermediaries and keep up-to-date with industry news and upcoming events via our newsletter.