UK Chancellor of the Exchequer George Osborne has decided not to extend the Stamp Duty holiday for First Time Buyers, (FTB) provoking fury from critics with accusations of undermining the Government’s attempt to kick start the UK housing market.
The Government decision comes despite massive lobbying from the mortgage and estate agency industries and various organisations, including the Council of Mortgage Lenders, Nationwide, Legal & General.
The Government, however, says the Stamp Duty break has proved to be ineffective and it will end on March 24th 2012 as planned.
The Government has stated that they intend to produce proof of how the Stamp Duty holiday has not worked and will instead concentrate on other measures announced in its new housing strategy, notably its controversial mortgage indemnity scheme on which it has now unveiled a few more details.
The Chancellor revealed that the Government will underwrite the 95% mortgage scheme, which is available only for new-build purchases, by up to £1bn.
The Autumn Statement said: “The Government will take on a contingent liability which will build up in line with purchases under the scheme, to a maximum of £1bn.”
Under the scheme, taxpayers will be responsible for 5.5% of the value of each home purchased. Builders will put 3.5% of the value of each home sold under the scheme into a funding pot, which will be called upon by lenders if the properties are repossessed at a loss.
The initiative aims to help 100,000 households purchase a new-build home with a 5% deposit.
It is unclear how many first-time buyers have succeeded in getting on to the housing ladder because of the current Stamp Duty holiday, although evidence is that they have melted away.
The Royal Institute of Chartered Surveyors (RICS) warned that ending the Stamp Duty holiday could distort the market with a mini boom and bust.
A RICS spokesman said: “By choosing to end the relief in four months rather than immediately, there is a clear risk that there will be a spike followed by a dip in the housing market as buyers rush to take advantage of the relief before March. It was hardly surprising that the Stamp Duty break had failed to help first-time buyers, given the lack of affordable mortgages and homes on the market”.
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