Country houses for sale

Property experts on the Stamp Duty cut: ‘Soaring mortgage costs will bring house prices back down to earth, irrespective of tax cut’

The September 2022 Stamp Duty cut announced by the UK government is part of a wider plan to stimulate growth in the economy — but what impact will it have on house prices? We've collated views from across the property market.

Chancellor of the Exchequer Kwasi Kwarteng issued a ‘mini-budget’ on Friday morning, announcing sweeping changes to everything from income tax to VAT for visitors.

For those in property, the cut in Stamp Duty is the most eye-catching of the new rules — and unlike many of the other announcements, they take place with immediate effect.

Note, though, that the rules only apply in England and Northern Ireland. For those seeking a home in Wales or a property in Scotland, rates are set by the local assemblies and are unchanged for now — though generally speaking in the past, they have largely followed Westminster’s lead.

  • The baseline for paying Stamp Duty has been doubled from £250,00
  • For first-time buyers, no Stamp Duty will be payable on houses up to £425,000
  • First-time buyers will benefit from discounted Stamp Duty on houses up to £625,000
  • The 5% bracket still applies from £250,000 to £925,000
  • The 10% bracket still applies from £925,000 to £1,500,00
  • The 12% bracket still applies above £1.5 million

With mortgage rates soaring — five-year fix rates are almost three times higher than they were this time last year — and the economy quite possible already in recession, according to the Bank of England on Thursday.

Recommended videos for you

Here’s what the major estate agents had to say about the new rules and their likely impact:

Tom Bill, Knight Frank: Soaring mortgage costs will hit house prices, and Stamp Duty cut won’t change that

‘Just when you think housing demand is cooling, along comes another stamp duty cut. Together with other measures designed to boost the economy, a cut will intensify and prolong demand in the housing market. However, what the Chancellor is giving away, the Bank of England will more than take away. Many buyers will find the impact of rising mortgage rates soon eclipses the benefit of a stamp duty cut, which will keep firm downwards pressure on prices next year.

‘The cost of a five-year fixed-rate mortgage has almost tripled over the last year and this upwards trajectory will continue. Almost four million first-time buyer mortgages have been issued since 2009, which is a large group of homeowners who don’t know what it’s like when monthly interest payments rise meaningfully. The gravitational forces of higher rates will bring house prices back down to earth irrespective of any stamp duty cut.’
Tom Bill, head of UK residential research at Knight Frank


Lucian Cook, Savills: Stamp Duty cut makes it easier for first-time buyers, but it won’t send up prices

‘The biggest beneficiaries of the stamp duty changes are likely to be first time buyers in London and the more expensive parts of South East England, where the savings on offer will make their deposit requirements look a little less daunting. However, given a combination of recent house price growth and increases in interest rate raises this is not going to magically result in a surge of first time buyer home buying activity.

‘Similarly, a maximum up front stamp duty saving of £2,500 for other buyers, is relatively small in relation to the additional annual mortgage costs seen since the beginning of the year. And as the cut is permanent it is unlikely to bring the same urgency to the market as the recent stamp duty holiday.

‘The changes will undoubtedly be welcomed by those in the process of buying. But in the short term, they are unlikely to result in a further spate of house price growth and instead are more likely to temper the effect of the wider economic headwinds facing the housing market.’
Lucian Cook, head of residential research at Savills


Nick Leeming, Jackson-Stops: Stamp Duty cut will gently stimulate the lower end of the market — but spikes in transactions can create bubbles and backlogs

‘There was nothing mini about the Chancellors Budget this morning, which sends a clear message for the UK to pursue economic growth. History proves just how impactful a market wide cut to stamp duty can be. The rush to complete in June 2021 created fierce competition amongst buyers, and sellers reaped the rewards as house prices reached record highs. Today’s move will gently stimulate the lower end of the market, which in turn will create positive ripples up and down the many chains currently in motion.

‘The consequences of stamp duty reform, however, will need to be addressed by the government too. Any spikes in transaction activity can create market bubbles, and most frustratingly for many purchasers, this can in turn create a backlog of completions. Transactions are already taking much longer than before. The risk of not addressing this in the coming weeks as the results of further market stimulation take effect, could see delays increase.

‘At present, across our national network of offices, current pricing levels continue to tempt homeowners onto the market, with transaction levels up by 7.6% year on year, according to the latest HMRC data. Demand and supply levels also remain buoyant, with Jackson-Stops’ own data showing a 27% uptick in new instructions in August. We are seeing more ‘forever’ homes being bought earlier on in a buyer’s lifecycle due to the increased costs of moving, with muted stamp duty fees likely to increase market fluidity. It remains to be said however, that for many, quality of life remains the leading driver for moving home.’
Nick Leeming, Chairman of Jackson-Stops


Dominic Agace, Winkworth: Long overdue Stamp Duty cut will mean a better functioning housing ladder — it is vital we get new buyers on the ladder

‘At a time when the BOE has announced we are already in recession, it is welcome to have a promptly presented agenda for growth.

‘Some big and welcome changes initiated with a long overdue reduction of the extremely negative stamp duty, which hopefully now will allow a better functioning housing ladder. It is vital we get new buyers on the ladder.

‘Other initiatives to encourage investment in special zones are also welcome and can help much needed regeneration to these areas, creating better local environments and higher quality housing stock for people to enjoy.
Dominic Agace, chief executive of estate agents Winkworth


James Hyman, Cluttons: The government should have helped second home purchasers and private landlords

‘The changes to stamp duty the Chancellor has made today are of course positive for first-time buyers most importantly to counterbalance the increase in interest rates made yesterday. However, the increase in the stamp duty threshold to £250k will have minimal effect given it is well below the UK’s average house price.

‘It is disappointing that the chancellor has done nothing to encourage private landlords back to the market. What would really help the UK’s current housing crisis is a reduction of the 3% levy on second home purchases and reintroduction of tax relief for landlords especially on improvements to their properties.  The main reason why rents have escalated so quickly over the last two years has been lack of supply, which has been driven by so many landlords being forced to exit the market due to the government no longer making it viable to be a private landlord.’
James Hyman, head of residential at Cluttons


Iain McKenzie, The Guild of Property Professionals: House prices are already inflated beyond the budgets of many buyers, and only addressing supply will solve the housing crisis

‘This mini-Budget comes after the Bank of England announced that Britain was now in recession, so the Government has once again turned to the housing market to become a catalyst for economic growth.

‘The cut to Stamp Duty announced today will be welcomed by people currently buying a house, but this will not solve the wider issue of affordability in the property market.

‘As we saw during the pandemic, when you create incentives to buy, you see demand soar. As demand increases, the number of available properties falls, pushing house prices up. An increase in demand now would come at a time when the supply of housing is already low, with house prices already inflated beyond the budgets of many buyers.

‘The housing market is intrinsically tied to the health of the economy. Home-movers spend an average of £12 billion a year on home-related purchases such as furnishings and renovation. Moving can benefit other aspects of the economy, so it is good to see action taken to energise the property market.

‘The Government needs to address the issue of housing supply by making home-building a priority. The review on planning systems for infrastructure announced today could go some way towards easing the supply issue, but it relies on the Chancellor’s pledge to ‘get Britain building’.’
Iain McKenzie, CEO of The Guild of Property Professionals


Adrian Anderson, Anderson Harris: The government and Bank of England are pulling in opposite directions

‘We have a scenario where the government are trying to turbo charge the economy with huge tax cuts while the Bank of England are trying to put the brakes on with high interest rate rises.  I think many of us will find this scenario very confusing.

‘Are the measures announced in the mini-budget by the government today sending mixed messages? Does the left hand know what the right is doing?

‘The measures announced will help put more money into the economy in the short term. However, it does not solve the main issue for many of us which is soaring interest rates and a cost of living crisis. If interest rates continue to rise quickly, many borrowers will have far less disposable income and there will be many who may be unable to pay their mortgages.

‘The Stamp Duty cut will be welcomed by home buyers as everybody purchasing a new home will benefit. The announcement is especially good for first time buyers and those living within London and the South East who can claim a discount (relief) on purchases up to £625,000.
Adrian Anderson, Director of property finance specialists Anderson Harris


David Hannah, Cornerstone Tax: Cut will help first time buyers

‘We all know the challenges facing Liz Truss regarding UK’s property market – inflation and rising interest rates are causing a whole raft of issues. We’ve seen a surge in building costs and building materials which is slowing down construction. At the same time, the affordability of mortgages has worsened and that’s going to impact first-time buyers, but also anybody on a variable rate mortgage. Finally, it will inevitably lead to a slowdown in construction which will exacerbate the under-supply of UK property. So, whilst prices might flatten and the rate of growth may slow, I don’t expect property prices to fall.

‘The cut in stamp duty announced today hopes to provide first-time buyers with a better chance to get on the property market. With properties in the UK standing at the most unaffordable levels ever, anything which eases the ability to buy first homes is welcomed. ‘
David Hannah, Group Chairman of Cornerstone Tax


Simon Bath, iPlace Global:

‘Whilst a stamp duty cut could stimulate the housing market further – like the stamp duty holiday did last year – this could push house prices up even more at a time when there are such low levels of stock. This means that borrowers could be paying higher mortgage bills, when soaring costs are already severely impacting millions of people across Britain.

‘First-time buyers are likely to be affected the most from today’s announcement, especially as property and mortgage prices continue to soar. Many of these people will be looking to purchase their first home, and although the market could see a slowdown towards the end of the year as demand continues to wean and stock numbers slowly begin to recover, their chances have continued to dwindle due to high competition and rising mortgage prices.

‘The chancellors announcement to build more homes across the country is welcome news for the market. However, the government must ensure that support is given to all ends of the spectrum – from those looking to buy their first home, to those struggling with mortgage repayments. New schemes must be introduced to replace old ones like Help to Buy, especially for those who can’t afford the opportunity to step onto the ladder.’
Simon Bath, property expert and CEO of iPlace Global