The housing market is booming and there is a high demand for mortgages, so the process of buying a property is taking much longer than usual. Don’t count on benefiting from the stamp duty holiday. If you’re currently house hunting, we recommend budgeting for the prospect of paying stamp duty…

The property market was given a significant boost by Chancellor Rishi Sunak on 8 July this year when he announced a temporary stamp duty holiday on properties up to and including £500,000. This had the potential to save buyers up to £15,000 on their purchases and was a deliberate move by the government to boost the property market.

It paid off as the market became very busy with the combination of the stamp duty holiday and pent-up demand resulting in a high volume of property transactions.

Consequently, house prices are now at their highest in five years and UK mortgage demand is at its highest in 13 years. There are 100,000 additional house sales expected during the first quarter of 2021 alone. 

However, many people in the midst of purchasing a property have unfortunately discovered that the entire process is taking much longer than anticipated. Lenders are taking longer to arrange mortgages while valuations and conveyancing tasks are also taking more time. This means that some buyers won’t complete on their purchase before the stamp duty holiday ends on 31 March 2021, so there has been pressure on the government to extend the deadline.

A temporary boost

The Guild of Property Professionals lobbied the government for an extension and a petition of over 22,000 signatures was also submitted. In response to the petition, the government said that the stamp duty holiday was designed to be ‘a temporary relief to stimulate market activity’ in order to protect jobs.

It went it to say that it has no plans to extend the stamp duty holiday deadline. This means that anyone in the early stages of purchasing a property or anyone about to start looking should budget for the worst-case scenario of missing the deadline.

‘There are currently 15 weeks to go until stamp duty reverts to normal,’ says MBA’s Sales Manager Phil Leivesley. ‘We’re going to lose two weeks at Christmas with solicitors and lenders closing their doors, which gives us 13 weeks. Ordinarily, this would be plenty of time, but everything is taking so much longer.’

Phil adds: ‘In my view anyone agreeing to buy from now on risks missing the deadline, and I recommend that people make arrangements to have the additional funds in place just in case.’

Help for first-time buyers

However, it’s not all doom and gloom. First-time buyers, who have had a challenging time this year due to most lenders withdrawing 90 per cent mortgages, will pay less stamp duty than existing homeowners as before.

From 1 April 2021, if you’re a first time buyer purchasing a residential property, you’ll pay less or no tax if you and anyone else you’re buying with is a first time buyer and the property price is £500,000 or less. You’ll pay zero stamp duty on the first £300,000 of the property. From the next £300,001 to £500,000, you’ll pay five per cent stamp duty.

If you’re not a first time buyer, you’ll pay zero stamp duty on up to the first £125,000, two per cent on the next £125,000 (the portion from £125,001 to £250,000) and five per cent on the next £675,000 (the portion from £250,001 to £925,001). You can find more information about stamp duty on the government’s website and you can also use the government’s stamp duty calculator if you need further assistance.

In the meantime, first-time buyers who have struggled to find a deposit higher than ten per cent will be pleased to hear that lenders are gradually reintroducing higher loan-to-value products. The market is expected to calm down a bit at the end of the first quarter and this is likely to mean more choice for first-time buyers and hopefully more competitive interest rates.

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