After much speculation, the Government has confirmed that it is scrapping stamp duty on some homes in an attempt to help struggling first time buyers.
In a statement the Treasury said: "The Chancellor of the Exchequer has today announced that stamp duty land tax will not apply to purchases of residential property of £175,000 or less.
"This will provide an exemption from stamp duty land tax for land transactions consisting entirely of residential property where the chargeable consideration is not more than £175,000."
Currently, the one per cent purchase tax has to be paid on all homes worth £125,000 or more, but from tomorrow, the level is increasing to £175,000. In real figures, this means that someone buying a home worth £175,000 will save £1,750.
But, the relief is only a temporary measure; it will last for a year, starting tomorrow, September 3, and remaining in place until September 2 2009.
The decision to axe stamp duty
on homes worth £175,000 or less is just one of a package of measures being unveiled by the government to help boost the ailing housing market.
Other measures include a plan whereby first time buyers with a household income below £60,000 can apply for a "free" loan for 30 per cent of the value of a new home for five years, and a £300million Mortgage Rescue scheme, which aims to help around 9,000 families on the brink of repossession remain in their homes.
The rescue scheme would see landlords and housing associations clear the mortgages and rent the property back to the family.
The Government is also planning to pump a further £400million into affordable housing and £200million into inner-city regeneration.
The Conservatives and Liberal Democrats say they are in favour of action, but are not convinced that Labour's plans are enough.
Shadow chancellor George Osborne says the Tories will look at the details of these measures and support those that will work but warns that they are "not going to help the vast majority of families facing a rising cost of living and falling house prices," while Liberal Democrat leader Nick Clegg called it a "hotchpotch of measures thrown together to save Gordon Brown's political skin."
But, despite these criticisms, the measures have been welcomed by mortgage
companies and home builders who are being hit hard by the housing crisis.
Chris Cummings, Director General of the Association of Mortgage Intermediaries (AMI), said, "we are in favour of a proportionate intervention by the Government in the UK's faltering mortgage and housing markets."
A spokeswoman from Halifax said, "this is a sensible measure and it will help the housing market."