Mini-Budget Set to Include Stamp Duty Cut
This Friday’s (23nd September) mini-budget looks set to include a stamp duty cut according to The Times, with Prime Minister Liz Truss acknowledging her economic plans may be unpopular but that they will “grow the British economy”. Whitehall sources have labelled the predicted announcement the ‘rabbit’ in Kwasi Kwarteng’s speech, but industry insiders are split on whether the proposal will be good for the UK housing market.
Head of intermediary relationships at Coventry Building Society, Jonathan Stinton, described the levy cut as “good news for homebuyers”. He said the current average stamp duty bill of £5579 for an average-priced home in England is more than three times the £1566 that it was in 2014 when the thresholds were last reset.
Stamp duty was temporarily reduced by Rishi Sunak during the pandemic – a move that was welcomed by homebuyers. But critics argue the policy was harmful for the housing market.
Emma Jones, managing director at broker, When The Bank Says No, said the previous cut in stamp duty was “a great push during the pandemic” but that she questions whether it may have been what “got us to where we are, with significant price increases, bidding wars and people now potentially exposed as they have over-borrowed.”
This is a view shared by many, with economists across the board predicting that this latest cut will lead to further rises in inflation as house prices soar to record highs. Founder of Shaw Financial Services, Lewis Shaw, was pretty forthright in his condemnation of the idea. He described cutting stamp duty as “off the charts”, arguing that it will only make things harder for first-time buyers looking to get on the property ladder.
Graham Taylor, managing director of independent broker Hudson Rose, agrees and says the solution to the growing housing issue is more affordable homes that will “underpin and strengthen the market”. Although he caveated this remark by saying it “seems to be something successive governments are unwilling to invest in.”
With inflation currently sitting just above 10% and the UK facing a cost-of-living-crisis, there is no doubt that any moves to make buying a house or moving home more affordable will be welcomed in some quarters.
But Coventry Building Society’s Jonathan Stinton says any such decision must be linked to energy efficiency incentives if it is to be truly successful. He argues that the chancellor will be “missing a trick” if he doesn’t combine an overhaul of tax rates and thresholds with a drive to reduce energy bills for UK homeowners.
In response to criticism, Liz Truss neglected to comment directly on what will be included in the announcement but did confess that her policies will favour the wealthiest – at least in the short term. The new PMs belief in trickle-down economics, though, was not unexpected. Indeed, the economic policies she spoke about during her leadership campaign were part of what appealed to die hard Tories. And they certainly indicated that this was just the sort of move we could expect.
Since being elected as leader, Ms Truss has repeatedly stated she is not afraid to make big calls. She has already come under fire for her announcement on tackling energy prices which many said did not go far enough in supporting the most vulnerable.
Whether she gets this latest big call right is also yet to be determined. Her theory that a vibrant housing market underpins a growing economy is a view that is broadly agreed upon. But many are suggesting that cutting stamp duty will increase the cost of buying a home to such a degree that the market will be anything but ‘vibrant’. Only this month, HSBC Holdings Plc suggested the UK is on the “cusp of a housing downturn.”
Only time will tell if this is the right decision. But it’s fair to say the initial reaction to it from the mortgage industry is one of general mistrust with just a modicum of hope.