MIRAS Down - Stamp Duty Up

Gordon Brown has reduced mortgage tax relief (MIRAS) from 15% to 10%. The move, which is a continuation of the last Government's policy, was widely predicted although some believed that he may have reduced the rate further or even abolished MIRAS altogether. The reduction will take effect in April 1998.

"Holding down the housing boom" by Les Gibbard © BBC

Mr Brown said: "I will not allow house prices to get out of control and put at risk the sustainability of the future." He said he was determined that the UK should not return to the "instability, speculation and negative equity" of the 1980s and 1990s.

It is thought that the new rate will cost ten million homeowners about £10 per month once it takes effect.

An increase in stamp duty was also introduced although it was less wide ranging than many expected. The duty was raised by 0.5% to 1.5% on properties over £250,000 and doubled to 2% on properties over half a million pounds.

This will have a significant effect on whoever buys Tony Blair's five-bedroom Islington home, currently on the market at £615,000.

The reaction from lenders tonight was that although the changes were disappointing, they could have been much worse and are unlikely to undermine the recovery in the housing market.

Matthew Ryall, an economist from the Royal Institution of Chartered Surveyors, said that the changes were "nowhere near as bad" as some pre-budget predictions.

Tony Blair's London home - £615,000 and 2% stamp duty

The Chancellor also announced that the national home insulation programme would be expanded. Contractors would be encouraged to take on young people to insulate the homes of pensioners. Mr Brown also said that the Government would make more money available to local authorities for housing - £200 million this year.

"Local authorities will have borrowing consents for an additional £900 million - £200 million this year and £700 million next year - for building new houses and repairing existing stock." the Chancellor said.