Permanent cuts to Stamp Duty, which were announced as part of Kwasi Kwarteng’s disastrous mini-Budget, have survived today’s reversal by new Chancellor Jeremy Hunt.
Along with the cut to national insurance, the Stamp Duty changes are all that remains of Kawrteng’s tax cuts.
Other changes see income tax changes scrapped and the energy support packages put in place for two years now being slated to end in April next year.
The Government has been U-turning out of the former Chancellor’s statement since markets and the pound went into freefall after the event on 23rd September.
Kwarteng was eventually forced out of office last week making him the second shortest-serving Chancellor in UK history.
Hunt’s scrapping of the Budget has gone further than expected as the Government looks to reassure markets. The moves seem to be working with gilt yields dropping over the morning.
The changes to Stamp Duty mean that buyers no longer pay stamp duty tax on the first £250,000 of a property purchase. The threshold was previously £125,000.
The property price at which first-time buyers will pay duty was increased to £425,000, up from £300,000.
The Chancellor will be giving details to Parliament this afternoon.
Reaction
Richard Pike, Phoebus Software’s chief sales and marketing officer:
“They say “a week is a long time in politics”, and it is likely to feel like a very long week as we wait to see how the markets adjust to the latest U-turns announced by the Chancellor today.
“The initial market reactions are calm, which is a big positive. Some borrowers would have been assisted by the 19% rate now reversed, and the additional uncertainty of the review of the fuel allowance now being six months instead of two years will be a concern, even though media headlines will stoke fires in this area.
“The reality is that wholesale fuel prices could change in six months and in April the need for lighting and heating is a lot less over the summer months, and so this is a sensible approach.”
“For the housing market we only have to look at the latest Rightmove HPI released today, which shows that house prices have hit another new record average, despite recent economic turmoil. Something that highlights the continuing problem of supply and demand.
“While the demand is there and the changes to Stamp Duty remain, along with an imminent increase in interest rates, pressure is almost certainly going to be on lenders.
“The reduction in the number of mortgage products available since the mini-Budget is a cause for concern, especially for first-time buyers. Now is the time for lender innovation to ensure that the continued demand can be catered for.
“It is still early in the peace but rising interest rates and high inflation have yet to quell borrower appetite. How long that will be the case remains to be seen, but for now we all need to keep adapting to the ever-changing landscape.
“The interest rate decision later this month will be a big barometer of what the Bank of England thinks of this U-turn.”
Emma Hollingworth, distribution director, MPowered Mortgages:
“The new Chancellor’s decision not to scrap the cuts to the Stamp Duty is an indication that the Government is still serious about tackling the issues facing homebuyers.
“Interest rates are now at the highest level since 2008, meaning many first-time buyers will struggle to get on the housing ladder, so the cuts to Stamp Duty are a welcome change for this group in particular.
“Supporting both homebuyers and homeowners is a priority now more that it has ever been, especially in an environment where the cost of living and mortgage rates continue to rise.
“Mortgage Lenders need to continue to adapt their mortgage products to respond to the changing needs of homeowners and buyers.
“For example, at MPowered Mortgages we offer free valuations and cashback options as we know features like this can help. We urge all homeowners and buyers to speak to a broker about the options available to them.”
Riz Malik, director of Southend-on-Sea-based R3 Mortgages:
“Taxi for Liz, please. Hunt has put the final nail in the coffin for Trussonomics, the disastrous economic experiment that we have had to endure for the past few weeks.
“Over the weekend, Hunt repeatedly said that he would do what he can to ensure rates do not go higher than they need to. That was a colossal shift from Liz who kept on passing the buck to the Bank of England.
“When the person who has been on the job for four days looks more like a PM than the PM, you know you need to call a removal van to No 10.
“She had the opportunity on Friday to redeem herself and save her job but she ran out of the press conference like Usain Bolt. It’s game over surely for the PM.”
Marcus Wright, MD of independent mortgage broker, Bolton Business Finance:
“I’m not sure which is worse, further government turmoil from a leadership change or continued conversative party turmoil from Truss staying.
“Never in all my life have I witnessed such a political mess and lack of good leadership from any of the political parties.
“Downing Street is officially now a disaster movie. I’m waiting for Bruce Willis to appear at the podium.”
James Miles, director of Exeter-based broker, The Mortgage Quarter:
“It’s time to go Liz. You are leading this country into financial ruin and a crash. A General Election is now essential and calling one is her only way to save face. Right now, the Tories will be destroyed at the polls.”
Gaurav Shukla, mortgage adviser at London-based broker, Home Me:
“It seems Jeremy Hunt’s announcement has injected some stability and calmness into the markets.
“However, there is one last thing for this government to do to placate the markets, and that’s to remove the Prime Minister pronto. She’s in position but not in power.”
Jonathan Southgate, founder at Bristol-based broker, Sterling Southgate:
“Just weeks ago we were plunged into a financial quagmire only for the new number two to come in, knock on the head all but a few of the Prime Minister’s policies, completely undermining Number 10’s authority.
“This has to be the final nail in the coffin of “Trussonomics” and proof that the current government are so detached from the general public, who have suffered unnecessary anxiety, uncertainty and fear as the purchasing power of their money diminishes and lenders are forced to increase interest rates at breakneck speed.
“This may go some way to settle the markets, but it leaves further uncertainty for the majority of people and businesses in the UK who have to deal with the fallout of this failed political experiment.
Oli Garnett, co-founder of Bristol-based creative agency, Something Familiar:
“The hare-brained mini-Budget has thankfully been kicked into the long grass. But so, too, has the credibility of this government. The whole Truss administration has been a comedy of errors.”
Paul Neal of Derbyshire-based Missing Element Mortgage Services: “How will this massive U-turn reinject confidence and stability into markets? This Government has passed beyond farce. The Prime Minister needs to go and go now.”
Mark Robinson, managing director of Southampton-based Albion Forest Mortgages:
“With the Bank of England and the Government seemingly back on the same page, there may be light at the end of the tunnel for our economy. W
“hilst Liz may have thrown Kwasi under the bus over this, I think we still need a change in leadership at the top. It will be an interesting few days and weeks to see what mortgage lenders do with this renewed confidence the Bank of England has in the chancellor.”
Lewis Shaw, founder of Mansfield-based Shaw Financial Services:
“Trussonomics has been shown to be an idiotic experiment perpetuated by talking heads within think tanks such as the IEA.
“Off the back of this, Liz is now PM in name only; she’s in office but not in power. We’ve got more instability to come as the Tories try to wrestle with their fractured internal ideologies between ultra-free-market libertarian proponents and the moderate side, of which few are left.
“Nevertheless, we know that we’re going to have a new PM, and behind the scenes, the 1922 committee will be away sorting out the mechanisms for it. If anyone knows of a time machine going spare so we can go back to 2015 and have chaos with Ed Miliband rather than the strength and stability David Cameron perpetuated, that would be great.”
Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial:
“Liz Truss is in office, but not in power. Hunt is our de facto prime minister and Rishi Sunak is writing the budget.
“Truss is without authority, but she could claw it back if her supply side economic reforms still pass.
“I understand the reversals on tax Hunt has had to make, but reversing the proposed changes to IR35 is laying down his plan to change all of the supply side reforms, too, and this genuinely will be bad for growth.
“It will be very interesting to see what Hunt offers in the budget in a couple of weeks time for those who demand a high growth economy. He can’t simply increase taxes to these levels and not offer any reforms or forecasts for tax reductions in the future without getting crucified further in the polls.”
Anil Mistry, director at Leicester-based RNR Mortgage Solutions:
“Hunt has returned to reality and realised that the tax cuts in the mini-Budget were simply not feasible. Hopefully, this will bring confidence and stability to the UK markets and the weak Pound. It will be interesting to see how long Liz Truss lasts, as this announcement has obliterated her credibility.”
