Cutting stamp duty tax is unlikely to support first time buyers as the housing market continues to feel the pinch of increased mortgage rates.
Professor Les Mayhew, expert in statistics, said that Chancellor Kwasi Kwarteng’s mini budget was well intended but said there was not much to inspire first-time buyers considering the current position of the housing market.
Prices rose by 8.7 per cent in annual terms after an 8.2 per cent increase in August, with the average cost of a UK house now more than £367,000 – according to property website Rightmove.
The threshold at which buyers will now start paying stamp duty was doubled to £250,000 by the Chancellor and to £425,000 for first time buyers.
While this uplift may see an increase in demand in the short-term, Professor Mayhew, a Professor of Statistics at Bayes Business School said: “The real problem is saving enough for a deposit and hikes in mortgage rates which will quickly cancel out any stamp duty saving so maintaining the downward pressure on house prices.
“A strong market is good for the economy because of the multiplier effect on manufacturing and a range of other services. Having said that, the intended effect of the move will be less than hoped for as it will not save purchasers a lot, if anything, in the grand scheme of things although it might for existing homeowners.”
Professor Mayhew added that the mini budget was designed to keep the economy going by making work worthwhile but also persuaded the unemployed, inactive and older workers to return to work or work longer hours.
While this is positive, it paints a bleaker picture for pensioners who may be struggling financially and concerned about a loss in value to their pension because of inflation.
“There is nothing in it for pensioners. They should benefit from a much higher triple-lock, to ensure their pension doesn’t lose value. Fortunately for those still working, the Chancellor decided against reinstating national insurance – at least for the moment.”
“There are also unintended consequences – the UK is not a hermetically sealed economy and the drop in the value of the pound should be a wake-up call for the Government not to be so reckless.”