True, the Chancellor, Gordon Brown, did take another bite out of more affluent buyers, by increasing stamp duty on property purchases from 1.5 per cent on the entire amount of purchases over pounds 250,000. Duty on property purchases over pounds 500,000 will rise from 2 to 3 per cent.
On the mortgage interest relief (Miras) front, lenders said they were delighted at the no-change decision, which leaves relief in place at 10 per cent from 5 April, down from 15 per cent in the present tax year. Most experts had predicted a further cut to 5 per cent in April 1999, if not its outright abolition. Each 5 per cent reduction adds pounds 10 a month to the cost of home loans over pounds 30,000.
Chris French, chief executive at Kensington Mortgage Company, a home loan broker, says: "Were delighted the Chancellor has made no change to Miras and no significant changes to stamp duty.
"The housing market is still reasonably fragile and with the threat of higher interest rates still strong, it is important that the cost of borrowing is not increased significantly."
In fact, had Mr Brown lived up to the market's widespread expectations, most analysts believe it would have had relatively little effect on house prices. Ciaran Barr, chief UK economist at Deutsche Morgan Grenfell, said earlier this week that his company predicts a rise in property prices of about 8 per cent this year.
Indeed, some building societies, including Skipton, are arguing that the pounds 3bn annual cost of Miras is mis-directed. They would have been relatively happy to have seen it scrapped altogether, as long as significant resources were used to help more vulnerable groups, including first-time buyers.
Mr Brown's measure on stamp duty is expected to yield pounds 390m in the coming tax year, rising to pounds 520m 2000/01. Of that, 25 per cent will come from some 30,000 transactions in the residential property market. That, however, depends on how house prices proceed in the next few years, particularly in London and the South-east.
As with the earlier stamp duty hike in July, the Chancellor offered scant opportunities to buyers hoping to squeeze their purchases through before the revenue-raising measures come into force. They will apply to all purchases taking place on or after next Tuesday, except for those made where an exchange of contract had already taken place before last Tuesday.
In other ways, the Chancellor may have prolonged the agony of homebuyers. The City's reaction to the Budget was to drive up sterling against other foreign currencies. This in turn increases the potential for a further increase in interest rates.
- Nic CicuttiReuse content