At a time when increasing numbers of people are complaining they are are unable move up the ladder or are being priced out of the market altogether, the Chancellor promised the move would cut the stamp duty bill for all but those buying the most expensive properties.
The reform represents an unashamed bid for centre ground votes in next year’s also while also underlining Mr Osborne’s credentials with the Conservative grassroots who have traditionally placed a high value on helping families into home ownership.
Mr Osborne’s last foray into home ownership was with the ‘help to buy’ scheme with its deliberate echoes of Margaret Thatcher’s ‘right to buy’ policy in the 1980s.
He told MPs stamp duty had been described as the “worst-designed and most damaging of all taxes”.
“It’s time we fundamentally changed this badly-designed tax on aspiration,” he added.
Campaigners have been pressing the Government to change the system as rising house prices have pushed more and more home buyers into higher stamp duty brackets, ramping up the up-front cost of buying.
Darren Stubbs, managing director of Yorkshire-based housebuilder Stonebridge Homes said: “We have plenty of evidence that homebuyers are still finding it hard to secure a mortgage and the situation only got worse following the mortgage market review, with the resulting stricter guidelines.
“The changes to stamp duty are a welcome boost to the housebuilding industry, saving the buyer of the average house around £4,000.
“With the Northern housing market making a much softer recovery than the South East, any incentive from Number 11 is welcome.”
The Council of Mortgage Lenders estimated that only 1.5 per cent of house sales would be hit by higher stamp duty as a result of the reforms.
CML director general Paul Smee said: “This fundamental reform has been a long time coming, but better late than never.
“Although there are losers as well as winners, the vast majority of mortgaged transactions will benefit from lower tax as a result of this move.”
Until today, stamp duty was a so-called ‘slab tax’ meaning that if a property fell into a higher stamp duty band - even by only a single £1 - the buyer would have to pay the higher rate on the whole purchase price.
Mr Osborne’s reforms mean that from today, higher stamp duty rates will only be charged on the proportion of the house price which falls into each band, in a similar way to income tax.
The new rates are a two per cent rate on values between £125,001 to £250,000, a five per cent rate between £250,001 and £925,000, a 10 per cent rate between £925,001 and £1.5 million, while values of £1,500,001 and over will attract a 12 per cent rate.
That means someone buying a house for £200,000 under the new rules will pay nothing on the first £125,000 but will pay a two per cent stamp duty rate on the next £75,000.
The tipping point comes for those buying top-end homes. A home worth £937,500 will attract the same stamp duty bill of £37,500. But someone buying a property worth £2.1 million faces paying an extra £18,750.
Beth Laidler, property lawyer from Blacks Solicitors in Leeds said: “Under the new regime, purchasers of low- to mid-value properties will most likely pay less stamp duty than under the old regime.
“This means that sellers will be able to negotiate sale prices that better reflect the true values of their properties, without the amount of Stamp Duty being too restrictive for purchasers.”