Plans to stagger stamp duty spark debate over affordability, debt, and the true need for reform
Rachel Reeves is weighing a plan to allow homebuyers to spread stamp duty payments over several years, a measure the Treasury hopes might ease labour mobility and reinvigorate the housing market. But mortgage brokers have warned the proposal risks adding complexity and debt without tackling the underlying problem.
The Chancellor faces a sizeable fiscal challenge ahead of the Budget, with forecasts pointing to a £25 billion hole under her fiscal rules. Productivity downgrades expected from the Office for Budget Responsibility (OBR) are likely to widen that gap, intensifying the search for reforms that could spur growth while safeguarding revenues.
Among the options under discussion is a system allowing stamp duty to be met in instalments. Think tanks such as the Tony Blair Institute for Global Change have advocated versions of the idea, while industry groups including Rightmove and Zoopla have voiced support for easing upfront costs.
“Repairing a gaping wound with a Band-Aid”
For Geoff Garrett of Henry Dannell, however, the plan misses the mark. “I've been a big advocate of stamp duty reform, it's desperately needed. This isn't it. This isn't stamp duty reform. This is just kicking a problem down the road and just almost extending the problem. It's like an IOU. It's not going to change anything.”
He argued that the true barrier remains the scale of the tax. “We've had a massive surge over the last 20 years of people renovating and making the best of their existing properties because the cost of doing that is cheaper than stamp duty… this type of approach from the Chancellor, in my view, is just trying to repair a gaping wound with a Band-Aid.”
Garrett also warned that instalments could tempt buyers into overextending. “You're almost creating a false economy that you can afford to move when really what happens if interest rates move up?”
Cashflow relief - if designed well
Louis Mason of Oportfolio struck a more optimistic note. “In my opinion, anything that eases the difficult upfront costs of buying a home is a plus, and allowing buyers to spread their Stamp Duty bill would certainly help with cashflow at the point of purchase.”
But he stressed the need for safeguards. “If it simply defers the tax but adds interest or extra charges, it risks becoming just another layer of debt that lenders will need to factor into affordability checks.”
Lender unease
Adrian Anderson of Anderson Harris doubted lenders would welcome the change. “Even though the immediate cost is lowered, there will be additional ongoing payments for the deferred portion. This will increase monthly/annual outgoings, which might stretch the borrower’s budget and affordability for mortgage purposes.”
He added: “Scrapping stamp duty or reducing the amount that is paid upfront will stimulate the housing market. Stamp duty is tax that is complicated enough I do not think it needs to be made any more complicated.”
“It all comes down to affordability”
Rachel Lummis of Xpress Mortgages highlighted how stamp duty derails many moving plans. “Right now, stamp duty is stopping many people from moving, especially higher up the ladder, when it can be a rather substantial amount and so a change to stamp duty to would be welcome.”
She suggested instalments could help certain borrowers. “Having the stamp duty payment running alongside the mortgage could mean the difference to buying the property or not.” Yet she also flagged unanswered questions on affordability, product design and the risk of households taking on too much debt.
Divided opinion
The Treasury continues to explore wider reforms, including a more proportional property tax system. But within the mortgage industry, opinion is split: some see staged payments as a lifeline for cash-strapped movers, while others warn it is a distraction from genuine reform.
