Alliance & Leicester mortgages sees problems for first time buyers

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Alliance & Leicester mortgages sees problems for first time buyers

Fri 7th Jan 2005

One in four first-time buyers is finding that stamp duty land tax is a "major obstacle", Alliance & Leicester has revealed.

Barring some exceptions, stamp duty is paid on properties worth more than £60,000 at a rate of one per cent.

This trebles on houses costing more than £250,000 and for properties worth more than £500,000 purchasers pay four per cent.

Without exception all properties sold worth more than £150,000 incur stamp duty.

As a result of rises in house prices, four times as many first-time buyers are being affected by the tax, which last had its lower threshold raised more than a decade ago, Alliance & Leicester found.

The average house in the UK currently costs £162,086, Halifax has revealed today, however the £60,000 stamp duty threshold was set in 1993, at which time the average house price was £62,000.

Alliance & Leicester surveyed the people who bought their first property in the last 12 months, and discovered that half of them realised that stamp duty was an additional expense only after beginning the mortgage buying process, meaning it had not been factored into their plans.

A quarter of first-time buyers found stamp duty could delay their attempts to purchase their first home when they were shopping around for their mortgage, the bank added.

"Alliance & Leicester's findings show that the cost of stamp duty is a real issue for first-time buyers. There are more than four times as many first time buyers today who view stamp duty as a challenge to buying a home, compared with 30 years ago," said Stephen Leonard, director of mortgages at Alliance & Leicester.

When the bank looked at the people planning to get onto the property ladder in the next 12 months, it discovered that 63 per cent had not even thought about stamp duty, with one in three not knowing what it was.

"Clearly home movers, especially first-time buyers, view stamp duty as prohibitive," Mr Leonard noted.

"As more properties fall within the higher stamp duty bands, the more important it becomes for potential home owners to realise that stamp duty is a sizeable proportion of the overall cost and take it into account at the outset."

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