Lenders call for change to stamp duty

Britain's biggest mortgage lender and the Council of Mortgage Lenders (CML) today called on the government to raise the level at which stamp duty is charged.

Research by Halifax showed that first-time buyers in six of the UK's 12 regions now pay stamp duty, compared to people in just one region in 1993, when the ?60,000 level was introduced.

Housebuyers are exempt from stamp duty if the home they are buying costs less than ?60,000. For properties sold for between ?60,001 and ?250,000 it is charged at 1%, with the rate gradually increasing to 4% for properties costing more than ?500,001.

The bank said those trying to get on the property ladder in the west Midlands, east Anglia, the south-west, the south-east, Greater London and Northern Ireland are now likely to pay stamp duty, compared to just those in Greater London in 1993.

It added that in these regions the amount of stamp duty paid by the typical first-time buyer ranged from around 2.8% of average annual earnings in the west Midlands to 5% in London. According to the research, last year first-time buyers paid an average of ?78,111 for their home compared to ?45,249 in 1993. This meant that in 1993 they would have avoided paying the tax because their property fell below the threshold, but in 2001 they would have been charged an average of ?781.

The CML said the government's failure to index the tax in line with house price inflation was unfairly penalising homeowners.

CML said that in the second quarter of 1997, when Labour first came to power, just 23% of first-time buyers paid stamp duty, but by the final quarter of 2001 this had nearly tripled to more than 60%.

The group called on chancellor Gordon Brown to use the Budget to increase the stamp duty threshold to ?85,400, to bring it in line with house price inflation of 42% since May 1997.

It added that the threshold for inheritance tax, which has risen from ?215,000 to ?242,000 since 1997, should be raised to ?306,000 to reflect the increase in property prices.

And the group also called on the government to increase the maximum level for state support with mortgage interest payments for homeowners who lose their job.

The government only offers help with interest on the first ?100,000 of a mortgage, but the CML argued that this should be raised to ?142,300. CML deputy director Peter Williams said: "Homeowners are making a growing contribution to government revenue because of the failure to increase tax allowances.

"Since 1997, the number of homes that would be liable for stamp duty has grown by millions.

"At the same time, government support for homeowners has diminished: Miras (tax relief on mortgage interest) has been abolished and people have to wait longer for income support, which is also now less likely to cover their interest payments. The forthcoming Budget provides an important opportunity for the government to reform the way stamp duty is levied, in order to lessen its impact on the housing market."