Both parts of the scheme required the borrower to have a 5% deposit.
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Osborne also announced a new Help to Buy scheme for Londoners which providers those with a 5 per cent deposit an interest-free loan of up to 40 per cent of the value of a newly-built home.
Chancellor since Cameron took office in 2010, Osborne said his spending plan was affordable because of projections that tax revenues were set to increase.
However, experts warned that in the short term it could lead to a flurry of purchases and higher prices.
Prime Minister David Cameron’s Conservative government suffered a humiliating defeat last month when Britain’s upper chamber of parliament the House of Lords rejected plans to cut tax credits.
“This will further suppress transactions and prices in the prime central London market, given the extent to which this market has been supported by purchases from second home owners and investor buyers”. In London, where the typical price was £337,734, investors will pay £17,018 to the taxman, compared with £6,686 today. This is another hit for Landlords who are still anxious about how changes to Mortgage Interest Relief (MIR) announced in the Summer Budget will affect them.
The changes will make a significant difference, as shown by the example of a £250,000 buy-to-let property, which will see the stamp duty payable leap from £2,500 to £8,800.
The extra surcharge is aimed at stemming the booming growth of residential property investment which has expanded at an alarming rate, raising “boom-bust” concerns, and has pushed first-time would-be buyers out of the market.
Osborne said “this government chooses to build”. This would push up competition for homes and therefore prices, it was argued.
He said: “We welcome today’s announcement and that housing remains a key priority for Government”. It means many properties are out of reach for those on average salaries.
Faced with some hard decisions regarding public spending cuts, the Chancellor chose housing by prioritising investment in new affordable homes.
Michael Wistow, head of tax at Berwin Leighton Paisner, said to solve the housing crisis, the United Kingdom needs more houses to buy and more houses to rent.
The government has also create a London Help to Buy scheme with a 40 per cent equity loan, from 2016, which will run until 2021.
Precise Mortgages managing director Alan Cleary says: “Some people’s knee jerk reaction that this is the end of the buy-to-let market is well wide of the mark”.
It is the Chancellors clear policy to help solve the housing crises by building more homes and squeezing the competitiveness of the Private Rental Sector thus shifting the balance from renting to home ownership. “Now is the time to back our police and give them the tools”, he said.
Adrian Anderson, director of mortgage brokers Anderson Harris, said: ‘Help to Buy has been hugely successful across the country but hasn’t had such a big impact in the capital because property prices are that much higher.
To raise this sum, assuming they are able to borrow four times their annual salary, they will need a salary of £48,125 to make London Help to Buy work for them.
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Osborne sweetened the cuts by announcing an affordable house building programme amid complaints that only the wealthiest can now afford to buy properties, particularly in southeast England.
