First-time buyers hit by stamp duty, finds Alliance & Leicester

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

10:33 07 January 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.

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

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

As a result of rises in house prices, four times as many first-time buyers are 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, but the 60,000 stamp duty threshold was set in 1993, at which time the average house price was 62,000.

Alliance & Leicester surveyed people who have 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."