Truss plots Stamp Duty cut

The Prime Minister, Liz Truss, could cut Stamp Duty as part of her mini-Budget, or fiscal event, later this week, the Times reports.

Truss and her Chancellor, Kwasi Kwarteng, have been working on the “rabbit” of the fiscal event for more than a month, the Times reported.

But the mooted move has been met with a lukewarm response from brokers.

Lewis Shaw, founder of Mansfield-based Shaw Financial Services, said: “There are many bad ideas in the political Top 10 right now but cutting Stamp Duty is off the charts.

“This move will push house prices even higher, worsening inflation and further pricing first-time buyers out of homeownership.

“Put it this way, if someone asked me how to drive an already overheated property market into dangerous bubble territory and make things worse for everyone, this policy would be it. It’s bovine short-termism at its worst.”

While Emma Jones, managing director of Frodsham-based broker, When The Bank Says No, added: “I’m not convinced this is the right step for the property market as most people are more concerned about their monthly outgoings rather than Stamp Duty.

“Daily conversations we are having are around budget and to be quite honest stamp duty is an afterthought.

“The Stamp Duty incentive was a great push during the pandemic but I can’t help but wonder if that’s what’s got us to where we are, with significant price increases, bidding wars and people now potentially exposed as they have over-borrowed.

“House prices are higher than ever and now mortgage rates are following. More increases in prices, which this move could trigger, will simply make mortgages even more unaffordable and prevent many people from getting on the property ladder at all.”

Further reaction

Jamie Lennox, director at Norwich-based mortgage broker, Dimora Mortgages:

“Stamp Duty needs a reform without doubt, but a repeat of the 2020 holiday isn’t necessarily the answer as this created a very overheated market with many people paying way more for a property than they saved in Stamp Duty.

“The other issue is when any Stamp Duty holiday stops, it’s like a tap being turned off with a lack of new properties coming to the market.

“However, with interest rates increasing dramatically since the record lows of 2020/2021, I’m not sure it will have the same impact as last time around.

“We’d rather see a reform that brings the nil rate up to the average house price, which increases each year with the house price index. Helping more people buy the average house without paying tax would be far more sustainable in the long run, but maybe that’s too long-term and not a vote winner.”

Graham Taylor, managing director of Nailsworth-based independent mortgage broker, Hudson Rose:

“Cutting Stamp Duty will appeal to the Tory faithful but ultimately won’t massively benefit those trying to get on the housing ladder.

“With too few properties on the market already, this move will likely push prices even further out of reach for the aspiring first-time buyer. More affordable homes is the best way to underpin and strengthen the market but this seems to be something successive governments are unwilling to invest in.”

Malcolm Davidson, director of Hull-based broker, UK Moneyman:

“Why should anyone be taxed to buy a family home in the first place? There are plenty of other ways to raise tax revenue without punishing the aspirational. The only thing I would say is make it a genuine tax cut, not a holiday, to avoid another “cliff-edge” rush to action.

“Stamp Duty puts homeowners off putting their properties up for sale and this is a major contributing factor in the lack of homes currently on the market.

“If Stamp Duty were reduced it ought to encourage more people to sell. Stamp Duty is ripe for overhaul. It’s paid by buyers on the asset that someone else has made all the profit on. If it really has to remain, the Treasury ought to consider transferring the charge to the seller.”

Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial:

“Let’s be honest, the reforms to Stamp Duty Land Tax by George Osbourne weren’t universally welcomed by the property sector. The massive 3% surcharge on second properties dealt a huge blow to buy-to-let investors.

“That, coupled with the changes in the income tax regime, made things really unappealing. I fear, however, that any announcement may just be a simple cut to the standard rates and this will please no one. This will just stimulate an already overheated property market.”

Edgar Rayo, chief economist at London-based finance broker, Finanze:

“The PM’s higher growth pursuits in the hopes of getting more people to move will likely contribute to a further rise in house prices since property market activity will be stimulated.

“Despite the cost of living crisis and rising rates, this could reinject buyer confidence into the housing market after the nil rate band returned to £125,000 last year.

“However, properties in different price bands will have varied reactions to the tax cut, as happened in the recent Stamp Duty holiday. The impact will be felt more on the number of transactions instead. We expect a combination of these factors to raise house values between 3% to 4% before the year ends as a result.”

Imran Hussain, director at Nottingham-based Harmony Financial Services:

“We all know stamp duty needs reform but just cutting it without looking at capital gains is pointless as all it does is add more heat to a market that is already pricing out many working families. Also, if we do get a cut it needs to be permanent to avoid a cliff edge like last time.”