Banks claim stamp duty is unfair

The government was yesterday accused by mortgage lenders of "unfairly penalising" first-time buyers by failing to raise the stamp duty exemption threshold to reflect soaring house prices.

In a report published ahead of next Wednesday's Budget, the council of mortgage lenders said homebuyers, and first-timers in particular, were paying the price of the government's failure to increase the £60,000 threshold above which buyers pay stamp duty.

While a typical first-time buyer paid no stamp duty at all in 1993 - the year the threshold was set at this level - because the value of the property was usually below this amount, their counterpart today typically has to pay around £780, said Halifax, Britain's biggest mortgage bank.

But while the lenders hope to persuade the government to reform the way stamp duty is levied in order to lessen its impact on the housing market, there has been speculation that the chancellor is set to risk their wrath by increasing the tax. Shares in several leading housebuilders fell on Monday on the rumours.

Stamp duty rates have been increased four times since the Labour government came to power in 1997. Gordon Brown last raised the rates in the March 2000 Budget, when he increased the rate for properties costing between £250,000 and £500,000 to 3%, and for those costing more than £500,000 to 4%. For properties costing between £60,000 and £250,000 the duty is 1%, while below £60,000 sales are free of stamp duty.

The CML said the government's failure to increase the tax allowance means more than 60% of first-time buyers now pay stamp duty compared with 23% in May 1997.