Stamp Duty holiday is over: what are buyers' options now?
With the Stamp Duty holiday coming to an end, first-time buyers need to review their options if they still want to buy a property
The Stamp Duty holiday came to an end on 24th March, meaning that first-time buyers no longer qualify for the 1% exemption on properties purchased up to the value of £250,000.
The Stamp Duty holiday ended following a Government report which showed that the scheme had been relatively ineffective in its task of increasing the number of first-time buyers entering the property market.
So what are the options for buyers now?
Whilst the holiday didn’t bring huge numbers of first-time buyers to the market, it was a welcome incentive. As a result of its removal, we are now starting to see a number of new schemes introduced to the market to make it easier for first-time buyers to realise their dream of owning a home and for existing homeowners to move up the property ladder.
In an attempt by lenders to get the property market moving again, Halifax has recently launched a new product which has been designed to reduce the moving costs of first-time buyers by paying half of their Stamp Duty on properties which are priced between £125,000 and £250,000. This could save first-time buyers up to £1,250.
In addition to this, the Government has also launched a deposit support scheme which will allow buyers to qualify for a mortgage of up to 95% on new-build properties, although they will now have to pay Stamp Duty. Under this NewBuy Guarantee scheme, the Government and major house builders will guarantee part of the loan from banks to buyers. This is intended to help those with smaller deposits to get on the housing ladder and is aimed at the whole market, not just first-time-buyers.
For those who are looking to sell their property, one of the ways to incentivise buyers is by offering to pay their Stamp Duty. For example, if a house’s price is £160,000, then covering the cost of the 1% Stamp Duty would be £1,600. This again would be a welcome saving on the moving costs, as well as giving the buyer an extra incentive to purchase the property.
Those who are struggling to build up a cash deposit could look for a high-loan-to value mortgage to get moving. Several lenders have now started to offer mortgages of up to 95% of the value of the property. While these encourage people to move, they do usually come with higher interest rates.
Buyers are also keen to take advantage of lower mortgage payments caused by the reduced interest rates that we are experiencing right now. While this is giving people more cash in their pockets, borrowers need to make sure that they make contingency plans to be able to cope with the increased payments when the interest rates rise again.
Renting out your property
Finally, for those looking to move to a larger property but have insufficient funds to do so, another option would be to consider renting out their existing property and then in turn renting a larger one.
This is a useful way to get more space to accommodate an expanding family, but it is important to ensure that the rent charged is enough to cover the fees attached to renting a property and it would be prudent to make sure there is a contingency plan in place for vacancy periods, as otherwise they could find themselves having to cover both the mortgage and the rent.
It is hard to predict how the property market will react to the end of the Stamp Duty Land Tax holiday. However, with more and more properties coming onto the market, we expect that we will start to see a rise in the number of new initiatives available as housebuilders, lenders and the Government attempt to get people moving again.
Robin King is director of Move with Us.
What do you think? Is it good that lenders and the Government are launching these schemes to try to kickstart the market? Or should they leave the market to sort itself out?