Chancellor: Stamp duty to be frozen on homes worth £175,000 or less » Housing » 24dash.com

Homes worth £175,000 or less are to be exempted from stamp duty for 12 months as part of a package to revive the housing market, the Chancellor announced today.

The change, which comes into effect tomorrow, raises the threshold on which 1% stamp duty is paid from its current level of £125,000.

The move will save eligible home-buyers up to £1,750 when they purchase a property, and relates only to buildings entirely for residential use.

In a statement, the Treasury said: "The Chancellor of the Exchequer has today announced that stamp duty land tax will not apply to purchases of residential property of £175,000 or less.

"This will provide an exemption from stamp duty land tax for land transactions consisting entirely of residential property where the chargeable consideration is not more than £175,000.

"This relief will apply to transactions with an effective date on or after 3rd September and before 3rd September 2009."

The Treasury estimates that the one-year stamp duty freeze will cost the Government £600 million - suggesting that it expects about half a million home-buyers to benefit from the change.

Around half of the 90,000 home purchases completed each month are on properties worth £175,000 or less, but deals below £125,000 are already exempt from stamp duty.

The average price of a home in the UK was just under £165,000 in August, according to the Nationwide Monthly House Price Index.

The plan for a stamp duty freeze first emerged last month but was met by official silence - leading to claims that the housing market had been paralysed by dithering between the Treasury and Downing Street.

Today's announcement came as Communities Secretary Hazel Blears unveiled a further package of measures to revive the housing market, including help for first-time home-buyers and people at risk of repossession.

A mortgage rescue scheme will allow those facing repossession to sell their home to a registered social landlord (RSL), who will clear the mortgage and then rent it back to them at a level they can afford. In some cases, the RSL could buy a share in the property, or provide an equity loan to help reduce the homeowner's mortgage repayments.

Under the new HomeBuy Direct scheme, first-time buyers with a household income under £60,000 will be able to buy newly-built properties with a free-of-charge equity loan of up to 30% of the property's value, co-funded by the Government and the developer.

The Government is also planning to bring forward funding for social housing from existing budgets to deliver more properties sooner, with local authorities which manage their own housing stock able to apply for a grant to build social housing alongside RSLs.

Ms Blears said the measures, which apply only in England, were not aimed at people who had been reckless in their borrowing but at "decent" families who might find themselves in difficulties.

"We are looking at about £200 million over the next couple of years for families who are struggling with mortgages, there will also be £100 million to help with mortgage interest payments to keep people in their homes," she told BBC Breakfast.

"I think that is a very good use of money because otherwise you do end up spending a fortune... it is not just bricks and mortar when you get repossessed, it can destroy whole families."

Ms Blears said the measures were not going to "transform the world" but they were going to "make a big difference to those people that are struggling".

Referring to first-time buyers, Ms Blears told the BBC Radio 4 Today programme: "We can't run people's lives but we can try and help. What we're saying is... we will help you get the deposit so you can get the mortgage and you can get into the housing market."

Ms Blears said the housing plans would be paid for with money that the Government had "scheduled to spend in the next couple of years or so".

She said: "I think it is sensible Government policy to say let's bring forward that money so that people who are struggling can be helped, first-time buyers can be helped and we get more rented housing."

The initiative is part of a wider series of announcements which will be made in due course to help alleviate the pressure on consumers and the industry.

Ministers hope they will help shift some of the focus away from what has been a dreadful summer for Labour, with talk of a threatened coup against the Prime Minister and accusations of "dithering" over issues such as stamp duty and a windfall tax on the energy companies.

Yesterday Mr Darling was accused of "talking the economy down" as the pound slumped against the euro and dollar in the wake of his claim that Britain was facing the worst economic crisis for 60 years.

Recent figures show that the number of homes being repossessed hit their highest level for 12 years during the first half of the year, with 18,900 properties taken back by lenders, 48% more than during the same period of 2007.

Liberal Democrat leader Nick Clegg said Gordon Brown had produced a plan to save his job, not help people struggling with the credit crunch.

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."

Mr Clegg added: "The Liberal Democrats have consistently called for more help for those threatened with repossession, cutting energy bills and stopping irresponsible behaviour by banks. It is a pity that Gordon Brown only wakes up to the problem when his own job is under threat."

Downing Street said the Treasury would not identify how the estimated £600 million cost of the stamp duty holiday will be funded until this autumn's Pre-Budget Report.

Asked how Mr Darling will pay for the change, the Prime Minister's spokesman said: "The Government will consider its tax, spending and borrowing projections at the time of the Pre-Budget Report, in the normal way."

Challenged over why the announcement was being made today, rather than in the PBR - expected in November or December - the spokesman said: "The Government wanted to take decisive action to help people immediately who are affected by what is happening in the housing market.

"This is something that the Government has been considering over a considerable period of time. Now the summer break is over, the Government has taken the first opportunity to make its intentions clear."

Asked whether the initial 12-month holiday could be rolled over for a further period when it comes to an end on September 3, 2009, the spokesman said: "That will be a matter for the Chancellor to consider at the appropriate time."

The Chancellor said the country was facing a "unique set of circumstances" but he remained optimistic that "we will get through it".

In a broadcast interview he said: "We are facing difficult times - we are in a situation where you are facing the combination of the credit crunch with high oil and food prices and... this is unique, the IMF has said we haven't seen this since the 1930s.

"I believe the package we have announced today... will help us get through what is undoubtedly a difficult time. But I am optimistic that we will get through it."

Mr Darling said the funding for the stamp duty had come from "new money" but he would not reveal where that money had come from.

He said: "The stamp duty is new money and when I present my Pre-Budget Report in the autumn, I will be setting out my forecast, I will be setting out the measures that I think are necessary."

The funding for the other housing measures, including mortgage rescue plans, had been previously allocated and brought forward, he said.

Asked about his relationship with Gordon Brown during the economic downturn, Mr Darling said: "The Prime Minister and I have always worked and will continue to work closely together because both of us have the same objective.

"Here we are in unprecedented conditions... we are determined to do everything we can to help people and help the country."