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Stamp duty threshold raised

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Date: Tuesday 02 Sep 2008

LONDON (ShareCast) - The government is axe stamp duty on house purchases below £175,000 for a year in an attempt to boost the housing market and its own flagging fortunes.

The new stamp duty rate kicks in from tomorrow and is in addition to a £1bn package to stimulate the severely depressed first time buyer end of the housing market. At present, only purchases under £125,000 are stamp duty exempt. The new measure will cost £600m.

Other measures unveiled today include so-called "free loans" for five years of up to 30% of the cost of a house. The relief will be available to first time buyers in England with an annual household income of less than £60,000. Once the five-year period is up, buyers will be asked to pay an, as yet, unspecified fee. This scheme is expected to cost about £300m.

A further £400m has been earmarked for new social housing projects, while the government is also setting up an initiative where mortgage payers struggling to meet repayments can turn to a council or "social housing landlords" that will pay off the debt and charge tenants rent at an affordable level.

The period when income support on mortgage interest is paid is also being cut to 13 weeks from 39.

Th proposals will, "Help the housebuilding industry weather difficult conditions, so that, when the market recovers, they are ready to expand and get back on with building the new homes the country needs for the long term," the Department for Communities and Local Government said.

The Conservatives dismissed the proposals as a "short-term survival plan" for prime minister Gordon Brown, while Lib Dems leader Nick Clegg said the social housing stock could be increased far more easily by allowing local authorities to buy up unsold properties.

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