First-time buyers will welcome a temporary move to axe stamp duty on house purchases up to £250,000.

The Chancellor has headed calls to boost the housing market by announcing that first-time buyers will be given a stamp duty concession on house purchases below £250,000 – to the dismay of homebuyers looking at £1 million plus properties who will be hit with a 5% stamp duty levy.

In the Budget report, the government said it is “committed to ensuring everyone has access to a decent home at a price they can afford”, but said that affordability for first-time buyers continues to be a massive barrier.

The Chancellor said starting at midnight tonight (24 March 2010) there will be two-year stamp duty break for first-time buyers for property purchases up to £250,000. In order to offset the cost to the government however, homebuyers looking for properties over £1m will be forced to pay 5% in stamp duty.

The Council of Mortgage Lenders (CML) says that it welcomes the decision, but that it would have been much simpler to exempt all properties under £250,000 rather than impose the restriction to just first-time buyers.

However, despite its cautious reaction, the CML says that more than 136,000 first-time buyers will be helped by the move, which could help stimulate a lagging housing market.

CML Director-General, Michael Coogan, said: “The Budget offers a modest potential boost to the housing and mortgage market in terms of reducing transaction costs for first-time buyers, and potentially improving efficiencies for lenders.

“But as always the devil is in the detail and the detail is confused. The stamp duty concession in particular looks like a tax loophole waiting to happen.”

Brian Brown, Head of Research at Defaqto commented on the move: “This will clearly help the majority of first time buyers who can get on to the housing ladder, but, the hardest part of doing so is raising the necessary deposit in the first place. Mortgage rates are very much higher on low deposit mortgages where they are available.

In the Budget, the Chancellor also announced that the two banks that were hugely bailed out by the government would be committed to increasing their lending, which has been relatively restrained since the recession kicked in. Lloyds Banking Group and the Royal Bank of Scotland have pledged £3 billion and £8bn in additional mortgage lending respectively, and £44bn and £50bn in total gross lending to businesses.

A reprieve will also be given to homeowners who have struggled with mortgage repayments. The Chancellor revealed that the Standard Interest Rate will be maintained at 6.08% until December 2010, which could benefit around 220,000 homeowners.