Budget 2017: How will stamp duty cut help first-time buyers?

Andrew Cummings
November 24, 2017

"And no stamp duty at all for 80 per cent of first-time buyers from today". As well as predicting that they would see an uplift of 0.3% in house prices, the OBR also stated that the number of first-time buyers to benefit from the change would be minimal, at an estimate of just 3,500.

Chancellor Philip Hammond also confirmed that first-time buyers wishing to buy a home at a maximum of £500,000 would not be taxed on the first £300,000.

Even in London, where the average first-time buyer home costs £365,000 and a deposit £36,500, a £5,000 saving is welcome, but doesn't mean everyone wanting to buy a home can do so immediately. While the announcement was great news for many, our latest research has looked at where across England and Wales buyers will still have to stump up stamp duty, either at a reduced or full rate, based on the average first-time buyer house price. To understand whether it is a good thing, it is useful to think about two key reasons why people might be struggling to buy houses.

London first-time buyers usually borrow around £275,000, the United Kingdom average is £139,000. Most mortgages require the borrower to put up a minimum proportion of the purchase price - 5% or 10% for example. Some buyers with smaller deposits may be able to borrow more, "allowing them to buy properties that they otherwise could not afford - but more expensively", the OBR says.

The most significant impact of this will be felt in London, where first time buyers face higher prices.

Another possibility is that people have saved up their deposit but their earnings are not high enough for a mortgage provider to be prepared to lend them enough money to buy a suitable property.

Both measures were created to help young people get a foot on the housing ladder but it has emerged that many shared ownership properties are too expensive for the stamp duty break to be applied.

There has been some doubt about the government's ability to achieve this target, not least from the OBR, which has not made any adjustments to its forecasts for housing starts.

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