Kwasi Kwarteng has abolished stamp duty on homes worth up to £250,000 in a bid to boost the property market.
The announcement, in the chancellor’s mini-budget, came in the face of warnings from economists that it will force up prices and fuel inflation.
Mr Kwarteng said that his move – effective immediately – would take 200,000 people out of stamp duty altogether.
The chancellor raised the threshold below which no stamp duty is payable from £125,000 to £250,000 – and from £300,000 to £425,000 for first-time buyers.
The levy was previously imposed at 2 per cent for homes worth between £125,000 and £250,000 – or 5 per cent for a second home – with higher rates for any value above this level.
Raising the threshold will save £2,5000 on sales of properties worth £250,000 or more but less for those worth between £125-250,000 and nothing for homes worth under £125,000.
But an additional change increasing from £500,000 to £625,000 the maximum value of a property on which first-time buyers can claim relief makes the package more generous for this group.
People buying a home for the first time can expect a saving of up to £5,000 on a property worth between £300-400,000 and as much as £11,250 on a £600,000 purchase.
“Home ownership is the most common route for people to own an asset, giving them a stake in the success of our economy and society,” Mr Kwarteng told the House of Commons in a statement delivered just 17 days after he entered the Treasury..
“So, to support growth, increase confidence and help families aspiring to own their own home, I can announce that we are cutting stamp duty.”
He told MPs: “The steps we’ve taken today mean 200,000 more people will be taken out of paying stamp duty altogether,. This is a permanent cut to stamp duty, effective from today.”
But shadow chancellor Rachel Reeves said that much of the benefit from the changes would go to landlords and people buying second homes.
“These stamp duty changes have been tried before,” she said. “Last time the government did it, a third of the people who benefited were buying a second home, a third home or a buy-to-let property.
“Is that really the best use of taxpayers’ money when borrowing and debt are already so high?”:
And the changes were greeted with alarm by market analysts, with one developer warning they could be “the final push on the pump that sees the housing price bubble burst”, leaving recent buyers in negative equity.
Joe Garner, managing director at London-based property developer NewPlace said: “Introducing a cut to stamp duty five weeks prior to the deadline for help-to-buy loans is likely to see a mass surge of last minute transactions, followed by a huge drop-off after the deadline ends.
“It is irresponsible, populist politics that will likely see house prices increase further and decouple even more from income. It is likely to be the final push on the pump that sees the housing price bubble burst, leaving recent first-time buyers and purchasers in negative equity, whilst speculators swoop in on below market opportunities.”
And Philip Dragoumis, owner of London-based wealth manager Thera Wealth Management asked: “How will less stamp duty help first-time buyers when mortgage affordability is decreasing as interest rates go up?”