The government is expected to announce plans to cut stamp duty in its mini-budget this week, in an attempt to drive economic growth.

According to The Times, Prime Minister Liz Truss and Chancellor Kwasi Kwarteng have been working on the plans for more than a month and will announce them on Friday.

Truss said the stamp duty cut will allow more people to move and will enable first-time buyers to get on the property ladder.

Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, said potential cuts to stamp duty may risk “doing more harm than good”. She said stimulating housing market demand could push house prices up further, at a time when the supply of available homes is already tight.

Coles added: “You can see why the government is concerned about the housing market, because there’s a risk that rising mortgage rates and rising prices will dampen buyer enthusiasm. We know from recent experience that a stamp duty holiday effectively stimulates demand.

“No buyer will ever complain about a tax cut, but if the government was to cut stamp duty it would mean ignoring the fact that the real brake on the property market is a severe shortage of supply. Stimulating demand without addressing supply problems would risk more buyers chasing a tiny number of properties, which would push prices up. It’s what we saw during the coronavirus-inspired stamp duty holiday.

“By ramping up prices at a time of rising mortgage rates, the end result will be higher monthly mortgage costs, which are going to be increasingly unaffordable. This in itself could be enough to deter buyers, so there’s the risk it could end up doing more harm than good.”

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