What does the discount on the stamp duties of Kwasi Kwarteng mean for house prices?

The chancellor said the move would “increase confidence and help families looking to own their own home”. He also estimated that about 200,000 more people per year will pay no stamp duty at all.

The tax change could lead to more activity in the housing market, especially in the short term. Rightmove reported a 10 percent increase in traffic to its website within an hour of the announcement.

However, there was widespread skepticism about the ability of the changes to offset rising mortgage rates or increase affordability.

Will the stamp duty cut make it cheaper to buy?

The Bank of England’s key rate rose 0.5 percent yesterday, pushing interest rates to 2.25 percent, the highest level since 2008. Some are forecasting a full 1.0 percent increase next month, as the monetary policy committee sees the worst inflation in 40 years trying to tackle .

This change added £49 a month to the average tracker mortgage, according to figures from UK Finance.

Tom Bill, head of UK Residential Research at Knight Frank, said: “Along with other measures to stimulate the economy, austerity will intensify and prolong demand in the housing market.

“But what the Chancellor gives away, the Bank of England will more than take away. Many buyers will find that the impact of rising mortgage rates will favor a stamp duty austerity, which will keep prices down sharply next year.

“The cost of a five-year fixed-rate mortgage has nearly tripled in the past year and this upward trajectory will continue.

“Nearly four million new buyers mortgages have been issued since 2009, which is a large group of homeowners who don’t know what it’s like when monthly interest payments rise significantly. The gravitational forces of higher speeds will House prices back to earth, regardless of any stamp duty reduction.”

The latest Rics market research forecast flat price growth for the coming year, while the most recent data from Knight Frank suggested that house prices could rise as little as 1.0 percent in 2023.

Lucian Cook, head of residential research at Savills, said: “The biggest beneficiaries of the stamp duty changes are likely to be prime buyers in London and the more expensive parts of South East England, where the savings on offer will offset their down payment requirements. scary looking.

“However, given a combination of the recent rise in house prices and rises in interest rates, this will not magically result in a surge in first-time buyer buying activity.

“A maximum saving on stamp duty of £2,500 for other buyers is relatively small compared to the additional annual mortgage costs since the start of the year. And since the cut is permanent, it’s unlikely it will do the same urgency in the market as the recent stamp duty holiday.

“The changes will no doubt be welcomed by those in the purchasing process. But in the short term, they are unlikely to lead to a further rise in house prices and instead dampen the effect of the broader economic headwinds facing the housing market.”

Nick Whitten, head of housing research at JLL UK, said: “Despite raising the level of the stamp duty exemption for the first time, the likely increase in house prices it will cause would ultimately harm those aspiring buyers more than them. And this increased affordability pressure comes at a time when their flagship support product Help to Buy is coming to an end.

“The UK is facing an acute housing shortage – we are building far too few homes to meet demand. It is unlikely that the reduction of stamp duties is the best solution to remedy that.”

Edward Heaton, founder and managing partner of buying agents Heaton and Partners, said: “The extensions to the zero rate band will be welcomed by new buyers and particularly those acquiring lower value properties, but I can’t help but believe the outcome will just to support demand as we head into a recession.

“It could also fuel inflation and it will eventually make housing market access for first-time buyers increasingly unaffordable coupled with rising interest rates…

“While I believe the recent rises in house prices outside London are likely to be sustainable, the stamp duty cuts announced today will certainly increase the likelihood of creating a bubble that could burst at some point.”

What are the new stamp duties?

All buyers will pay up to £2,500 less in stamp duty after the threshold is doubled from £125,000 to £250,000.

First-time buyers will save more after the lower threshold where those who bought their first home rose from £300,000 to £425,000. The price cap for this first buyer reduction was also raised, from £500,000 to £625,000. This brings the maximum savings for new buyers to £11,250.

Real estate purchase price

SDLT Speed

Up to £250,000

0%

The part from £250,001 to £925,000

5%

The part from £925,001 to £1.5 million

10%

The part above £1.5 million

12%

The tax cut is permanent and takes effect today.

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