Housing market activity could be boosted after the ‘zero rate’ stamp duty bracket was doubled from £125,000 to £250,000.
But increased demand could also mean higher house prices, unless there is a significant increase in housing supply, experts said.
Around 200,000 more people each year will be exempt from paying stamp duty, the government has calculated.
A typical family moving into a semi-detached property will save £2,500 on stamp duty, he said.
First-time buyers, who have already paid no stamp duty on the first £300,000 of a property’s price, will see the threshold raised to £425,000.
The value of property on which first-time buyers can claim relief has also been increased, from £500,000 to £625,000.
Stamp duty applies in England and Northern Ireland, with separate property tax regimes in Scotland and Wales.
Announcing the measures, Chancellor Kwasi Kwarteng said the stamp duty reduction would be permanent and effective from Friday.
Soaring house prices and rising mortgage rates mean that people trying to move up or up the housing ladder face mounting costs.
There is also the obstacle of raising a deposit. According to property website Rightmove, first-time buyers typically need to find £22,409 for a 10% down payment on a home, up from £14,135 a decade ago.
The announcement came the same week as the Bank of England raised the base rate from 1.75% to 2.25% – the highest level since November 2008.
The move will add around £49 a month to the average tracker mortgage, according to figures from trade association UK Finance.
A previous stamp duty holiday, introduced by former Chancellor Rishi Sunak, ended last year. During the holidays, there were spikes in home sales as the holidays were scrapped and home prices hit a series of record highs.
Andrew Montlake, Managing Director of Coreco Mortgage Brokers, said: “The announced stamp duty change is thankfully effective today and a permanent change, rather than an unwanted holiday period which causes more problems than it does. solves it.
“This will indeed help many first-time buyers who have agreed prices now, but we need to be careful that, as usually happens, house prices don’t just rise further to eat away at potential savings and put homes out of reach for many people anymore, especially in an era of higher interest rates.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “Rising mortgage rates and rising house prices form a toxic cocktail that has the potential to kill demand. For buyers facing thousands of pounds right now (the stamp duty reduction is) a welcome change.
“However, there’s every chance that the change isn’t draining the toxic cocktail, it’s just remixing it.”
She added: “The shortage of buyers is not the biggest problem facing the property market at the moment, the real drag on the property market is a severe shortage of supply.”
The Chancellor also announced that he would support home buyers by increasing the use of government surplus land to build new homes, thereby increasing supply.
Under the government’s plans, new ‘investment zones’ will attract business investment and free up land for new housing.
Brian Murphy, Head of Loans at the Mortgage Advice Bureau, said: “It hasn’t been long since we’ve had a stamp duty break, and these things tend to build momentum which causes a wave of activity followed by a period of slowing down.
“However, the permanence of today’s announcement could temper a sudden increase in activity and allow some control to be regained in the UK property market.
“Yet the crux of the matter is that any change in the stamp duty will not solve the main problem at the moment: a major supply shortage.”
Rachael Griffin, tax and financial planning expert at Quilter, said: “We only have to look back a few months to see what a transformational impact the stamp duty exemption is having on the market.
“However, increased demand also means higher prices unless more inventory is built, which will be bad news for many.”
Ben Merritt, director of mortgages at the Yorkshire Building Society, said: “Instead of just focusing on tax cuts, it is crucial that we look to find other solutions specifically for downsizers – those looking to move into smaller properties – to try and stimulate a shrinking market.
“Recent research we conducted shows that a fifth (19%) of owners looking to downsize see stamp duty as a barrier to moving, but almost a quarter (23%) say it is the insufficient supply of suitable housing that prevents them from moving.”
Lucian Cook, head of residential research at Savills, said: “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 Proposed savings will make their deposit. the requirements seem a little less daunting.
“However, given the recent growth in house prices and rising interest rates, this will not magically lead to an increase in first-time homebuyer activity.
“Similarly, a maximum initial saving of £2,500 in stamp duty for other buyers is relatively small compared to the additional annual mortgage costs seen since the start of the year.
“And because the reduction is permanent, it is unlikely to bring the same urgency to the market as the recent stamp duty suspension.”
Jeremy Leaf, a North London estate agent and former residential chairman of the Royal Institution of Chartered Surveyors (Rics), said: “We would have liked to see additional help not just for first-time buyers but to encourage energy-efficient properties. energy and more investment in reducing energy consumption.
Nick Sanderson, chief executive of retirement village company Audley Group, said: “A reduction in stamp duty is a proven way to shake up the housing market.
“But it’s a short-term fix for a housing market with major flaws.”
Jason Tebb, managing director of property search website OnTheMarket.com, said: “First-time buyers are the lifeblood of the housing market, so it’s especially welcome to target them in particular with assistance that will help them climb. The levels.”