From U-turn to U-turn to all but completely axing the mini-budget, only a £13bn national insurance cut and a £1.5bn stamp duty cut survived the chancellor Jeremy Hunt’s announcement on Monday.
Under plans announced last month, no stamp duty needs to be paid on the first £250,000 of a property — up from the previous £125,000 threshold.
First-time buyers do not have to pay any stamp duty on property up to £425,000, up from £300,000.
The value of a property on which first-time buyers can claim relief also increased, from £500,000 to £625,000.
“While maintaining a cut to stamp duty will help stimulate buyer demand within the market, overall market health will be far better maintained by stabilising the mortgage sector and our ability to fund a property purchase in the first place,” Marc von Grundherr, director of Benham and Reeves, said.
“The government’s choice to maintain the cut to stamp duty tax signals their intent to keep the property market buoyant and this should help boost buyer confidence in itself,” James Forrester, managing director of Barrows and Forrester, said.
Stamp duty land tax (SDLT) is a lump sum payment you have to make when purchasing property over a certain threshold.
The government’s Stamp Duty Land Tax Calculator can be used to understand what you should pay.
However, the average first-time buyer will only be better off for five months before higher mortgage payments overtake their stamp duty savings.
Across all deposit sizes, the average rate offered on a two-year fixed-rate mortgage has now remained the same for four days, at 6.47%, figures from Moneyfacts.co.uk show.
The average five-year fixed-rate mortgage rate on the market has also remained the same for four days in a row, standing at 6.29% between Friday of last week and Monday.
The choice of mortgages has also remained broadly static in recent days, with 3,104 mortgage products available on Monday, which was slightly down on the 3,112 deals available on Friday last week.
The number of mortgage products dropped to 2,258 at the start of October, having stood at 3,961 on the day of the mini-budget.
“Jeremy Hunt’s speech is a huge U-turn for the government and basically puts us back to the position we were in before the mini budget. It is positive that the stamp duty cut will stay in place, but more important will be its effect on the markets,” Simone Webb, managing director of capital markets and finance at LiveMore, said.
“This was clearly a speech to bring a level of much-needed stability and confidence back. While interest rates were already on an upward trajectory, the level of rises we have seen in the past fortnight has outstripped most people’s ability to cope.
“We all need to hope that this speech and the next fiscal statement on 31 October will be enough to steady the markets enough that lenders can reprice and reintroduce the hundreds of mortgage products that necessarily had to be pulled due to market instability.”
* reversal of National Insurance increase
* cuts to Stamp Duty
* £1m Annual Investment Allowance
* Seed Enterprise Investment Scheme
* Company Share Options Plan
— Declan Curry (@declancurry) October 17, 2022
Chancellor Hunt said the ripping up of Liz Truss’s core economic policies was essential. “The most important priority now is stability,” he added.
Hunt claimed that no government can control the markets but it can give certainty to the markets about public finances.
The U-turns include the £21bn of retreats already announced by Truss on corporation tax and scrapping the top rate of income tax.
A £6bn cut in the basic income tax rate from 20% to 19% was shelved indefinitely.
The new chancellor has also reversed tax changes on dividend income, IR35 off-payroll rules, alcohol duty and a VAT-free shopping scheme for tourists, saving another £5bn.
Hunt also announced that help with energy bills for households will only last until April, with a review to find a “new approach” that will “cost the taxpayer significantly less”.
The government will continue with its reversal of the 1.25 percentage point increase in national insurance contributions, the chancellor said.
“There will be more difficult decisions, I’m afraid, on both tax and spending as we deliver our commitment to get debt falling as a share of the economy over the medium term,” Hunt said.
“All departments will need to redouble their efforts to find savings and some areas of spending will need to be cut,” he added.