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Stamp duty axed below £175,000
2 Sep 2008 15:12 BST

Homebuyers will not have to pay stamp duty on properties costing £175,000 or less for the next 12 months.

The current £125,000 threshold will be raised as part of a package of measures aimed at boosting the housing market.

Someone buying a home for £175,000 will save £1,750 under the scheme, which is likely to cost the Treasury £600m.

The government estimates half of all property transactions will now be exempt from stamp duty - up from one third when the threshold was £125,000.

'Do all we can'

Prime Minister Gordon Brown said the package of measures - including help for first-time buyers and families facing repossession - showed the government was taking action to help people through difficult times.

"Home owners need to know that we will do everything we can to keep the housing market moving," he told BBC News.

But the Conservatives - who say they would scrap stamp duty for first-time buyers on properties worth £250,000 or less - said the measures were a short-term survival plan to keep Mr Brown in a job.

The government has not said how it will pay for the £600m estimated cost of the stamp duty move.

Chancellor Alistair Darling said he would reveal more details in his Autumn Pre-Budget Report.

He said the government was also considering ways of increasing the availability of mortgage finance.

But - in an echo of his weekend interview with The Guardian in which he said the economic downturn could be worse than previously thought - he said other factors would be crucial to the housing market's recovery.

"We face a unique set of circumstances that we have not seen in generations, where you have a credit crunch and where you have high oil and food prices.

"But I remain optimistic, as I have said on many occasions before, that we can get through it.

"We will get through it and today's measures, helping the housing market, are one example of how the government can help people."

Other housing moves announced by the government include:

"Free" five year loans of up to 30% of a property's value for first time buyers of new homes in England Extension of powers for councils and housing associations to be able to pay off debt for homeowners who can no longer afford mortgage payments and then charge rent. Shortening from 39 weeks to 13 weeks the period before Income Support for Mortgage Interest is paid Bringing forward spending from future years to encourage more social housing to be built

The funding for these measures, which unlike the stamp duty move will only apply in England, has been previously allocated and brought forward, the Treasury said.

Under the new loans system, called HomeBuy Direct, households in England earning less than £60,000 will be offered loans free of charge for five years on new properties, co-funded by the state and developers.

'Difficult conditions'

Once the five-year "free" period is up, homebuyers will be asked to pay a fee, the Department for Communities and Local Government said - although no more detail of this was provided.

In a statement, the DCLG said: "Not only will this [HomeBuy Direct] help first-time buyers... it will help the housebuilding industry weather difficult conditions."

The prime minister has faced a difficult few months, with Labour losing two parliamentary seats in by-elections, the London mayoralty and many councillors in May's local elections.

On Monday, he said the UK faced "unique circumstances", including oil prices trebling and the global credit crunch.

But Mr Brown said the government was "resilient in... dealing with these problems".

He earlier denied a rift with Mr Darling, who had said the country was facing its worst economic crisis in 60 years.

The Organisation for Economic Cooperation and Development (OECD) has said the UK economy is likely to fall into recession this year - the gloomiest forecast yet from an official organisation.

The Conservatives said the measures announced to help the housing market were "too little, too late".

Shadow chancellor George Osborne said: "We will look at the details of these measures and we will support those that will work.

"But let's be clear, they are not going to help the vast majority of families facing a rising cost of living and falling house prices.

"Nor do they amount to the first instalment of the economic recovery plan we were promised.

"I suspect that what we will see in the coming weeks is a desperate and short-term survival plan for the prime minister rather that the long-term economic plan the country needs."

Liberal Democrat leader Nick Clegg said: "This looks like a hotchpotch of measures thrown together to save Gordon Brown's political skin.

"The social housing stock could be increased far more easily by allowing local authorities to buy up unsold properties and use them for new social housing.

"Yet again the government is desperately scrabbling around for a way to fix problems of its own making."

Scotland's first minister, Alex Salmond, welcomed an end to the uncertainty which he said was causing people to delay house purchases.

The Westminster government was now catching up with what the Scottish government had already done to help the housing market, he added.

Two weeks ago, Mr Salmond announced he was bringing forward £100m worth of housing expenditure to this year rather than in 2010.