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What does the Stamp Duty cut mean for Homebuyers?

The amount of stamp duty you pay depends on the cost of the property. Chancellor Kwasi Kwarteng announced the permanent changes as part of the government's mini-budget. They come into effect straight away. The price at which stamp duty is paid was doubled from £125,000 to £250,000.

The rates are now:

  • 0%: £0 - £250,000 (£425,000 for first time buyers)
  • 5%: £250,000 - £925,000
  • 10%: £925,000 - £1,500,000
  • 12%: £1,500,000+

The chancellor added that discounted stamp duty for first-time buyers will now apply to properties costing up to £625,000 - up from £500,000.

How much stamp duty will I pay?

Buyers of homes that cost less than £250,000 don't pay stamp duty. That will comfortably buy you an average terraced home in most places outside of the South East of England.

First time buyers can spend £425,000 before paying stamp duty.

What effect does changing stamp duty have on the housing market?

During the pandemic, the government announced a stamp duty holiday to help home buyers whose finances were affected by Covid. It meant no stamp duty was payable on the first £250,000 of a property.

It was widely thought to have stimulated the housing market and estate agents reported a surge of interest.

According to the Office for National Statistics (ONS), UK average house prices increased by 15.5% over the year to July 2022, up from 7.8% in June 2022.

However, many things may have contributed to rising house prices.

"The final closure of the stamp duty scheme at the end of September 2021 may have had no impact at all," says Nicky Stevenson, managing director at estate agents Fine and Country.

"Other factors are so much more important, namely the race for space, low supply, accidental savings [from the pandemic] and low interest rates."

What other help is there for first-time buyers?

High Street lenders are also offering mortgages to borrowers with a deposit of just 5%, under a government guarantee scheme which launched in April 2021. The policy is designed to help more first-time buyers secure a home.

The scheme is available to anyone buying a home costing up to £600,000, unless it is a buy-to-let property, a second home or, in some cases, a new-build.

Sources:
BBC Website