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First time buyers avoiding stamp duty

First time buyers avoiding stamp duty

Category: Mortgages

Updated: 11/11/2009
First Published: 11/11/2009

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
One third of first time buyers escaped paying stamp duty in September as a result of the Government's temporary £175,000 nil-rate threshold.

According to the Council of Mortgage Lenders (CML), 6,200 first time buyer loans were approved for properties between the old threshold of £125,000 and the temporary threshold of £175,000, representing 32% of the loans to first time buyers in September.

In addition, 7,800 first time buyers (40%) bought properties valued below the £125,000 original threshold. There were also 7,300 home mover loans for properties between £125,000 and £175,000 representing 24% of the loans to home movers in September.

Since the concession was introduced last September, an estimated 132,500 house purchase mortgage transactions have escaped paying stamp duty which otherwise would have incurred the tax at 1%, amounting to around 27% of the house purchase loans approved over the period.

Meanwhile, loans for house purchase in September totalled 50,600, an increase of 2% from August and 43% from a year earlier. Loans for remortgage increased 10% on the previous month but remained 48% lower than September a year ago.

The CML noted that although lending criteria remained tight, there was clearly demand from borrowers. For those able to provide the substantial deposit, finance was cheaper than in recent years.

The typical homebuyer had to commit 12.8% of gross income to cover mortgage interest payments in the third quarter of 2009, a figure unchanged from the second quarter and the lowest since the first quarter of 2004.

"The stamp duty concession has played a modest role in underpinning confidence in the housing market," said CML economist Paul Samter.

"As the end date for the stamp duty concession approaches, we may see sustained levels of activity at the lower end of the market in a traditionally quiet time. But the corollary will be lower activity in early 2010 as transactions are bunched in 2009."

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