§ Q58. Mr. Peter Bottomleyasked the Prime Minister if she will estimate the relative advantage to home buyers of an increase in the £25,000 limit in mortgage interest tax relief and an increase in the stamp duty exemption level of equivalent total cost to public funds.
§ The Prime MinisterRaising the stamp duty thresholds by £5,000 would cost much the same as the initial case of a £5,000 increase in the mortgage interest relief limit; but the eventual cost of an increase in the latter would be greater as it would tend to encourage extra borrowing over the next few years. Also only about two-thirds of the benefit of raising SDT would go to home buyers.
For individual home buyers the relative advantage would depend on the price of the house, the size of the mortgage and the borrower's marginal rate of tax. A £5,000 increase in stamp duty thresholds would benefit anyone buying a house for between £25,000 and £45,000; the maximum gain would be £225. A £5,000 increase in the mortgage relief limit would benefit anyone with a mortgage over £25,000; the maximum gain, at current interest rates, would be £150 for a basic rate taxpayer or £300 for a taxpayer with a 60 per cent. marginal rate. The stamp duty change is, however, a once-for-all benefit on purchase, whereas the increase in the limit would be an annual benefit—varying with remaining interest element.