Research commissioned by GE Money Home Lending found half of the brokers it surveyed believed stamp duty should rise immediately and be fixed at the average national house price.
Duncan Berry, director of mortgage sales at GE Money Home Lending, said: “In what looks set to be the Chancellor’s final Budget, it is important that first-time buyers and the affordability of housing are a priority. With increasing interest rates and rising property prices, more and more people are finding it harder to get on the ladder. Clearly brokers feel that stamp duty is a key concern for their customers and yet another added cost for first-time buyers. As lenders it is important that we continue to develop innovative ways of helping first-time buyers take that much desired step onto the housing ladder.”
The rise, if it were implemented in line with the average national house price, would take the exclusion band from £125,000 to just over £200,000 - an increase of more than £75,000 – and would save a buyer over £2,000.
The research, which asked mortgage brokers their views on the budget and possible action to help the plight of first-time buyers, revealed that almost a third (30 per cent) believe that the Chancellor should remove stamp duty altogether for those looking to get onto the ladder.
A tiny proportion are happy with it as it is (4 per cent), while over a quarter claiming that pegging it to regional house prices was the way forward. Some brokers, however, believe that there are other solutions open to the Chancellor, including making more affordable housing (20 per cent); increasing housing stock (10 per cent) and having more shared ownership schemes (4 per cent).
The industry remains focused on helping young people to buy their first home, and according to brokers 100 per cent mortgages and affordability calculators have had the biggest positive impact for first-time buyers in recent years. Other innovative developments which brokers think have been important include shared ownership schemes (22 per cent); flexible mortgages (7 per cent) and cashback mortgages (6 per cent).
Duncan Berry added: “The industry has introduced several tools to help alleviate the problems many people face when looking to buy their first home with 100 per cent mortgages and affordability calculators having provided some solution to the issue. However, with the average house price at just over £200,000 and the exclusion of stamp duty being just £125,000, many still have to pay-out huge amounts in tax on top of the purchasing price and other costs associated with buying a property. This continues to add to the high costs associated with buying a home.”
Meanwhile, SmartNewHomes.com has launched a campaign to get stamp duty for first-time buyers abolished.
According to the firm, with the average house price paid by a first-time buyer in 2006 now exceeding £150,000, the number of first-time buyers exempt from this housing tax is falling, acting as another barrier to young buyers stepping onto the ladder.
SmartNewHomes.com has posted a petition on its website, gathering further support for their campaign, to see stamp duty scrapped for first-time buyers. Signatories to the petition will be communicated to government.
David Bexon, managing director at SmartNewHomes.com, said: “Stamp duty for first-time buyers is halting the progression of this vulnerable group into the housing market. The number of first-time buyers forced to pay this tax is on the increase, making it more and more difficult for them to purchase their first home.
“In a survey recently conducted on our website it emerged that many first-time buyers are forced to wait until they are in their thirties to own their own home, with the majority citing financial reasons almost entirely for pushing properties out of their reach.
“While we have seen the emergence of more Housing Association schemes, geared at helping first-time buyers onto the property ladder, these schemes do not make buyers exempt from having to pay the added tax of stamp duty.
“For those purchasing a new property as their first home, there are a range of incentives offered by developers, a number of which will pay all or part of the stamp duty on their property, however, this exemption is not applied across all new homes and does not offer any assistance to the majority of buyers, who are purchasing existing stock.”
Stroud & Swindon Building Society believed Gordon Brown should reform the stamp duty system into a tiered system.
Under the current regime, purchasers are charged a flat level on the final purchase price of the property irrespective of the number of ‘bands’ it passes through. Stroud & Swindon calls for the government to review the system and move it to a fairer ‘tiered’ tax system.
An example of proposed system would see a person purchasing a home for £260,000 being charged £1550 (£125,000 at zero per cent + £125,000 at 1 per cent + £10,000 at 3 per cent) compared to the current cost of £7,800 (£260,000 at 3 per cent)
Under the proposed changes, first-time buyers and low-income earners would find it easier to get onto the property ladder. In addition, the changes would also mean that properties would sell for their ‘real value’ rather than suffering from ‘price bunching’ immediately below stamp duty brackets.
This system would see UK house buyers save an average of £1,250 with those in Greater London making the highest savings £6,250. Alternatively, if the government feels that this change would cause significant problems to implement, we call on them to raise the zero per cent band to at least £150,000 to more accurately reflect average house prices. This move would mean that the average home in the North West, North East, Scotland and Yorkshire & Humberside would all fall below this barrier – relieving the pressure on buyers in these markets.
Paul Chafer, sales and marketing director at Stroud & Swindon Building Society, commented: “The current Stamp Duty Land Tax regime unfairly penalises potential homeowners and those wishing to move up the property ladder. The average first-time buyer faces a bill of almost £1500 and the average property purchaser will need to find over £1800 – these are not insignificant sums of money and can cause people serious financial hardship.
“We call on Gordon Brown to recognise the effect stamp duty is having on ordinary UK consumers and rectify this in his budget or make sure that this issue is addressed next year. A tiered tax system or higher zero per cent bands will make the system fairer, more practical and improve the overall affordability of property.”
