While many are crediting the first-time homebuyer tax credit as a boon for the US housing market, a moratorium on UK mortgage tax is getting similar praise across the pond. The land stamp duty is a tax imposed on UK mortgagees and varies depending on the purchase price of the home. In 2008, the minimum purchase price threshold for a 0% tax rate was temporarily raised from £125,000 (US$206,840) to £175,000. The tax rate for homes purchased for more than £500,000 was capped at a maximum 4%. According to the Council of Mortgage Lenders (CML), 14,000 of the 19,700 first-time homebuyers purchased homes below the £175,000 threshold in September, avoiding paying the tax. Of those purchasers, 6,200 of them bought homes between the old £125,000 threshold and the new £175,000 limit. There were 7,300 loans originated for previous homeowners who purchased properties between £125,000 and £175,000, representing abou24% of the 31,000 loans originated for previous homeowners in September. The stamp tax moratorium was set to expire in September, but like the US homebuyer tax credit, was extended. The moratorium will now expire at the end of 2009. CML estimates since the increased threshold was created in September 2008, 132,500 house purchase mortgage transactions avoided paying the stamp duty, about 27% of all home purchase loans originated during that time. “The stamp duty concession has played a modest role in underpinning confidence in the housing market,” CML economist Paul Samter said. “As the end date for the stamp duty concession approaches, we may see sustained levels of activity at the lower end of the market in a traditionally quiet time.” But, Samter warned, the corollary will be lower activity in early 2010 as transactions are “bunched” in 2009. Gross mortgage lending totaled £12.9bn, 7% higher than August, but 25% lower than September 2008. Home purchase mortgage originations totaled 50,600 in September, up 2% from August and 43% from September 2008. The results mark the third consecutive month of year-over-year increases in home purchase mortgage origination. CML’s results come on the heels of recently released results from the Bank of England, that showed mortgage approvals and total lending to individuals climbed in September. But, CML said, refinance mortgage activity continues its annualized decline. There were 33,000 mortgages originated for refinancing, a 10% increase from August, but 38% lower than September 2008. Write to Austin Kilgore.
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