Stamp Duty ‘Hampering’ Property Uptake

Stamp duty is making property increasing unaffordable for potential first-time buyers, a study from a financial services firm has indicated.

In findings from Bradford & Bingley, just over two-thirds (68 per cent) of those consumers looking to get on to the first rung of the housing ladder will be liable to pay stamp duty if they have not already done so. However, as the price of the average British property continues to rise the financial company predicts that the amount of the tax that borrowers will have to pay also increases. Some 12 per cent of consumers in the south-east of England believe that the duty is set to account for more than one per cent of the value of the home they wish to buy.

Overall, 52 per cent of borrowers claimed the actual cost of stamp duty was higher than expected. Research from the firm also indicated that nine per cent of respondents are meeting the duty’s costs by taking out a secured loan or using a credit card. Meanwhile, one per cent claimed that they are simply not going to pay the fee. As Bradford & Bingley reported that the tax system is “wholly unfair”, it suggested that it was impacting upon buyers’ ability to meet property deposit and secured loan costs.

Just over a third of parents were now reported to be helping their offspring purchase their first property either by withdrawing money from savings, remortgaging or opting to take out an equity release product. However, Bradford & Bingley indicated this in turn could have “serious implications” for their own financial future.

Andy Wiggans, director of mortgages for the West Yorkshire firm, said: “Stamp duty was never designed to be a tax on first-time buyers, yet it now affects a vast proportion of them and is seriously hampering their ability to get a foothold on the property ladder. The average first-time buyer now has to find over £1,000 to pay this tax, at a time when most are struggling to even fund a deposit.”

And following the Bank of England’s vote to increase interest rates by a quarter of a per cent last week, prospective buyers are now reported to have to find to an extra £25 every month to meet mortgage costs. “This, on top of all their other costs, such as the Higher Lending Charge imposed by some lenders, is going to hurt,” Mr Wiggans added. He suggested that the government should carry out a full-scale review of the “stealth tax” and not just make “piecemeal measures”.

However, Paul Holmes, operations director for Firstrung, claimed that removing the levy would not do much to ease consumers’ affordability problems. “With an average mortgage of £200,000 for first-time buyers in the capital, the saving of stamp duty would only equate to one months’ mortgage payment,” he said. Mr Holmes also disputed recent Abbey research which suggested that making lifestyle changes, such as giving up smoking, will help make property more affordable as house prices will continue to rise. “Overall first-time buyer affordability can only be affected by providing a massive deposit, not by living like a monk,” he suggested.

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