New measures to boost the UK housing market - 2nd Sep 2008

Government has announced several measures to help home buyers and to give a much needed boost to UK housing market.

After months of speculation and campaign by several group, the chancellor  announced today that the threshold for stamp duty will be raised from £125,000 to £175,000. This change comes into effect tomorrow and will last for the next 12 months. This means that a purchase who is buying a property at the purchase price of £175,00 will save £1750 in stamp duty to the treasury. It is estimated that it will cover half of the UK property transactions and will cost £600 millions in loss revenue.

No other changes have been made to the stamp duty rates and the current rates are as follows:


Purchase Price                                                             Stamp Duty.

Up to £175, 000                                                            0 % of purchase price

Between £175, 001                                                      1 % of purchase price
And £250,000

Between £250, 001                                                      3 % of purchase price
And £500,000

£500,001 and more                                                      4 % of purchase price

Conservative party has called this a cynical plan to keep Gordon Brown in power and repeated their pledge that they will abolish stamp duty for 1st time buyers on properties worth up to £250, 000.

Liberal Democrats have called the new measures “too little too late” for the existing borrowers. They pointed out the measures they outlined last week which include tax cuts for low and middle income households, stopping unnecessary repossessions and moves to stop  the reckless banks jeopardising economic security.

Other measures announced by the government include :-

• Setting up HomeBuy Direct which will use £300 million to help 10,000 first time buyers, over the next 2 years to purchase newly build properties. This scheme will involve buying out 30 % equity in the property, and the buyer not paying anything back for 5 years, it is not clear what fees etc are payable from that point onwards. Any household with yearly income of under £60,000 will qualify.

• Putting aside £400 million for social housing. This measure is aimed at delivering 5500 new homes over the next 18 months.

• Giving extra powers to councils and housing associations so they can pay off the mortgage of struggling home owners and then charge then rent.

• Reducing the qualifying period from 39 weeks to 13 weeks when Income Support for mortgage interest rate is paid.

Lenders have given mixed reviews to the announcement as they believe that these measures are aimed at consumers and do not address the fundamental problem of lack of money available in the money markets.

Chancellor has stated that there will be more details in his autumn budget speech.