The rumoured stamp duty tax cuts on Friday as part of the government’s mini budget have been described by Edinburgh Mortgage Advice founder Mark Dyason as a “very cynical move as house prices are the bellwether of how rich the country feels”.
It was reported this morning that new prime minister Liz Truss and chancellor Kwasi Kwarteng are considering cutting stamp duty, which they believe would allow more people to move home and enable more first-time buyers to get onto the property ladder.
Truss has made no secret of her wish to cut taxes in an effort to stimulate the UK economy, with this being a major part of her bid for leadership.
Kwarteng will deliver the September mini budget, set out to provide strategies for economic growth and more detail on energy support to ease the cost-of-living crisis.
Dyason says: “It could be said that people can put up with inflation if their house is going up at the same rate.”
“When you need an intervention to prop up prices then the fall when it comes will only get bigger. Leave the market alone and let it find its level. The pain when it comes will get exaggerated by this kind of artificial stimulus,” he adds.
Also commenting, the Association of Mortgage Intermediaries (Ami) chief executive Robert Sinclair says: “A stamp duty cut to propel the housing market would indicate that the government is getting clear signals that the new build market is likely to struggle with the end of Help to Buy.”
“It may also propel people to get their existing properties to market and move. It is to be hoped that any initiative avoids the cliff edge dates that we saw in the covid inspired reductions.”
Meanwhile, Mortgages for Business sales director Jeni Browne says the stamp duty review is “long overdue” but “fantastic for the housing market”.
Browne says: “Of course, rumours about a stamp duty land tax reform caught our attention, which would stop the housing market from plateauing as much as we expect over the next 12 months.”
She explains that it would also be “ideal” if the stamp duty rumours included a review and reduction of the 3% surcharge on buy-to-let (BTL) property and second homes.
“With all the other tax cuts already on the cards – national insurance being the main one – Truss will need to balance the Treasury books carefully in order to fund all the financial support already pledged to combat the cost-of-energy crisis,” Browne adds.
Coreco managing director Andrew Montlake comments: “The new PM is gambling an awful lot on trickle-down economics, hoping that tax cuts that benefit the wealthy will ultimately also help others in time.”
“Stamp duty is a case in point and changes will at first assist those purchasing at higher levels, which they hope could free up stock further down the chain as people move. Stamp duty as a concept has been ripe for reform for many years and we can only hope that any change will be well thought out and permanent rather than another debilitating “holiday” period that adds further fuel to an already raging fire.”
“Whatever the change, in the short-term, property prices usually move up to swallow the stamp duty saving, which helps no one, certainly not first-time buyers facing rapidly rising mortgage rates and cost of living increases.”
“Get it right however, and in the medium to long term we may just see a market with more transactions rather than one where stamp duty acts as a further disincentive to move.”
L&C Mortgages associate director of communications David Hollingworth explains: “If you’d asked me last week if stamp duty would have been a focus of the mini budget I would have felt it unlikely.”
“We will have to wait and see whether that will bring a complete overhaul of bandings or cuts to existing rates but it sounds like the changes may be seen as more permanent than the recent holiday that contributed to an explosion in demand.”
“The pro and con of a holiday is that of course it provokes a ‘buy now’ stimulus but ultimately poses issues as the deadline nears.”
“First-time buyers are often a focus for incentives but relief remains in place for them unless that is to be extended to others. There may also be a rethink of the rates on higher value properties although that would court comments on benefiting those who are well off.”
Also commenting, Private Finance technical director Chris Sykes suggests that the effects of a cut in stamp duty depends on the length of the measure.
“We saw during the pandemic how much the market moved during the stamp duty holiday and ultimately it created a degree of fluidity in transactions. While this was only temporary, changes that help people move up the ladder or incentivise downsizing should be considered, and this could have a very positive impact on housing stock availability.”
“We would welcome a cut in stamp duty for households looking to downsize as this would free up much-needed housing stock. We believe the current lack of larger family homes is partly due to the disincentive effect of stamp duty on purchases for second steppers and those looking to downsize and this, in turn, leads to stock not being freed up.”
Sykes also says another consideration is the impact of tax-cutting measures on the Bank of England base rate.
“An increase in the base rate will likely impact more those needing to remortgage soon, while those locked into a fixed rate and can ride out the economic storm are more insulated,” he adds.
Landlords and buy-to-let
Speaking on other areas industry participants would like to see mentioned in the budget, Mortgages for Business’ Browne says while unlikely, she would “love to see some grant to help landlords with the cost of energy-efficient improvements”.
“At the moment, the whole sector is somewhat in the dark about: the actual deadline for these proposals and how the government expects landlords to fund these improvements when estimates indicate it could be c£10,000 per property,” she adds.
Meanwhile, discussing any mention of the previously published Fairer Private Rented Sector White Paper, Browne says she is “not hopeful”.
“I doubt that the Renters’ Reform Bill has moved on much further than the details we had in June, considering the ongoing cost-of-living crisis and the Conservative Party leadership race we’ve had in the interim.”
“I hope for the sake of landlords with properties in England and Wales that we’re not subjected to a rent freeze like the one in Scotland because, combined with rising mortgage costs, it could be very damaging to the private rented sector.”
“However, I appreciate we’ve already waited nearly three years for comprehensive details of this white paper, and patience (and confidence) is wearing thin,” she adds.