The stamp duty holiday on house purchases, announced by government ministers with great fanfare two months ago, has failed to stimulate demand among homebuyers, the Council of Mortgage Lenders said yesterday.

In early September the government unveiled the one-year holiday on stamp duty, raising the minimum threshold from £125,000 to £175,000, in an attempt to revive the flagging housing market.

But the number of mortgages for new house purchases fell 15% in September, down from 41,000 to 34,900, according to the Council of Mortgage Lenders.

Evidence emerged that banks were becoming even more cautious about their lending terms, with the average advance to first-time buyers falling to 84% of the purchase price, a level not seen since 1974.

First-time buyers must come up with 16 per cent of the purchase price – a sharp rise from a year ago, when they could borrow money to finance 95% or more of their new home.

In addition, banks are seeking to improve the profit margins they earn on mortgages, as the average fixedrate mortgage rate rose to 6.23% in September, its highest level since late 2007, before the Bank of England cut interest rates by three-quarters of a percentage point.

Financial Times, The Times

Topics