HM Treasury forced to rectify after money guru Martin Lewis rubbishes claims
The Treasury has deleted a controversial tweet claiming that a typical first-time buyer earning £30,000 a year could buy a £500,000 terraced home in London thanks to the government’s recent tax cuts.
The tweet from HM Treasury, posted on September 29, stated that due to the government Growth Plan, “a typical first-time buyer in London moving into a representative terraced house will save £11,250 on stamp duty & £1,050 on the household energy bills – and if they earn £30,000 almost an additional £400 on tax. This is around £12,700 in total”.
Financial expert Martin Lewis lambasted the statement on Twitter, describing it as “nonsense” and urging the Treasury to remove the tweet.
“To make that stamp duty saving you’d need to be buying a £500,000+ property,” the campaigner for consumer rights said. “With 10% deposit, cheapest fix mortgage would cost £2,400/mth (£28,000/yr). How can someone on £30k afford that?” he asked, ending his tweet with: “I am asking Treasury to remove it.”
Read more: Soaring house prices cancel out savings from stamp duty cut – research
Lewis’s swift response led to a stream of Twitter posts mocking the government’s claims, with one individual commenting wryly that he hoped the (hypothetical) first-time buyer’s £500,000 house was well insulated because they would not be able to afford to heat it.
Despite the comments, the tweet was still visible on the HM Treasury’s Twitter feed earlier this week.
Appearing on the Good Morning Britain TV program yesterday, Lewis once more raised the issue, reiterating the point live on air to chief secretary to the Treasury, Chris Philp, on Monday, explaining that a person on £30,000 a year before tax “cannot pay a mortgage of £28,000 a year”.
He added: “This seems fundamentally irresponsible for the Treasury to be putting out this kind of statement in the middle of a cost-of-living crisis.”
Philp said he had not seen the tweet but admitted that a person earning that amount of money would probably not be able to get a mortgage to fund a £500,000 house “unless, of course, they were doing so with a partner”.
Less than a day later the Treasury agreed to remove the tweet, saying: “While the figures were statistically accurate, we recognize assumptions were made about the typical first time buyer profile which weren’t reflected. We take responsible messaging v seriously, which is why we’ve deleted the tweet.”
Read more: UK house prices post steepest annual growth in 19 years
Under new stamp duty rules, a borrower pays no tax on property purchases costing more than £250,000, while first-time buyers will only pay the tax on purchases above £425,000 – up from £300,000 previously.
According to the government’s UK Gov website, the maximum amount that an individual can pay while remaining eligible for first time buyers’ relief has also been increased to £625,000.
However, the cost-of-living crisis and higher mortgage rates are expected to outweigh any advantages in stamp duty savings, with interest rates expected to go up by at least 1% next month and by 4% or more this Christmas before peaking at 5.38% sometime next year.
London property prices are also the highest in the country, with buyers expected to pay an average of £534,545 for a house, according to the latest Nationwide House Price Index, although the data also shows that it is the weakest performing region in the UK for annual price growth.
But like other would-be homeowners across the country, first time buyers in London now have far fewer mortgage products to choose from. According to Moneyfacts.co.uk, there were 2,262 residential mortgage products available on Monday, down by almost 4,000 since Kwarteng announced his mini budget on September 23.
The deletion of the tweet by the Treasury was the second highly publicised about-turn by the government in just over a day following chancellor Kwasi Kwarteng’s decision not to scrap the 45p tax rate cut for the highest earners.
The U-turn on tax at least had the indirect effect of lowering interest rate forecasts for next year, which until then had been expected to hit 6%.
