Changes to the stamp duty holiday came into force from 1 July. Greg Cunnington, our Director of Lender Relationships and New Homes, answers your questions and offers some good news about the availability of mortgage products.
Following the extension in March the full stamp duty holiday came to an end this week (30 June).
You will likely have seen lots of stories about buyers rushing to complete before this date, but the good news is a reduced stamp duty holiday is still in place until 30 September.
But how will this benefit you if you are moving and how does the perk differ to what was on offer in prior to June 30. Let’s take a look at some of your burning questions.
Stamp Duty – what has changed?
The existing stamp duty holiday was introduced in June last year as a measure to help boost the housing market following its closure in the first lockdown.
It meant for buyers that the stamp duty nil band, the minimum purchase price at which stamp duty is eligible, was increased from £125,000 to £500,000. This stamp duty holiday was then extended until 30 June.
However, the government also confirmed that this nil rate band would then be set at £250,000 until 30 September, giving an additional benefit for buyers who complete between 1 July and 30 September.
As such, there is still a saving of up to £2,500 available to those who complete on a purchase before 30 September.
For example, if you purchase a property for £300,000 before 30 September you would pay £2,500 in stamp duty. From 1 October, you would pay £5,000.
From 1 July, stamp duty will kick in above £250,000 at the following rates:
- £0-£250,000 = 0%
- £250,001-£925,000 = 5%
- £925,001-£1,500,000 = 10%
- £1,500,000+ = 12%
From 1 October 2021, rates are due to return to normal. That means the point you to start paying stamp duty will revert back to £125,001:
-£0-£125,000 = 0%
-£125,001-£250,000 = 2%
-£250,001-£925,000 = 5%
-£925,000-£1,500,000 = 10%
-£1,500,000+ = 12%
Special rates apply to first-time buyers, which I’ll touch on further down.
You can check out how much the stamp duty would be for your purchase price via this link .
Why did the government extend the stamp duty holiday?
The extension of the stamp duty holiday has helped to keep the property market buoyant as we emerge from the pandemic restrictions.
Property website, RightMove estimates an additional 300,000 property transactions in England could benefit from the tax saving from this holiday. That is a lot of buyers the government can help.
Although of course this would mean lower tax receipts from the stamp duty, home moving feeds into various other parts of the economy.
It leads to buyers purchasing homeware items, the need for removal firms, building and gardening work are instructed – it is a huge part of keeping the economy going.
How can I benefit?
There is now still a short window of opportunity for new buyers to take advantage of the stamp duty holiday.
We have found buying activity has been very high this year, so with this being the last period of the stamp duty holiday it is likely a lot of applicants currently viewing wanting to move fast!
Any buyer wanting to take advantage of this stamp duty holiday period will need to be able to progress fairly quickly, so should ensure they have their mortgage agreed in principle by speaking to an intermediary such as ourselves.
We can help you to have the correct documentation prepared, which will mean you can move at pace.
You should also ensure that you are set up with a solicitor who has confirmed they have a manageable work load. This will ensure you have the best chance of success to meet the 30 September deadline.
Some buyers will still miss this new deadline, so our advice would be to set yourself up to move as quickly as possible.
Beating the crowd
Recent data showed mortgage approvals and mortgage lending both rose in May and were well above pre-pandemic levels – demonstrating how buoyant the property market has been this year.
This means you should expect the property market to be very busy, and very competitive with other buyers.
At Alexander Hall we have escalated service access to the major lenders, so ensure you are speaking to an intermediary such as ourselves.
First-time buyer stamp duty incentive
Amid the clamour of the stamp duty holiday it is often forgotten – or overlooked – that there was already an incentive in place on stamp duty for first-time buyers. The good news is this remains in place indefinitely for purchases up to £500,000.
First-time buyers pay NIL stamp duty up to a purchase price of £300,000, and then pay 5% of any portion between £300,001 and £500,000.
If the purchase price is above £500,000, this incentive does not apply.
So for a first-time buyer, if you purchase a property for £300,000 your stamp duty bill remains zero.
If you purchase at £400,000 it would be £5,000 (compared to £7,500 for non-first-time buyers) – and at £500,000 it would be £10,000 compared to £12,500 for non-first-time buyers).
As such, it remains a great time to purchase if you are taking your first step on the property ladder. This is also backed up by recent improvements in the number of mortgage products available.
First-time buyers can access our helpful guides which will answer any questions you may have on the mortgage and buying process.
Interestingly, the conversation around buyers’ purchasing power has focused primarily on the stamp duty holiday deadline in recent months.
Buyers also need to factor in that mortgage product availability has improved significantly, meaning there are now more options to suit their circumstances. This is great news for buyers with small deposits or those who need to maximise their incomes.
In fact, data from Moneyfacts shows the number of mortgage products available has just increased for an eighth month in a row, and are now at the highest level since pre pandemic levels.
This is particularly good news for buyers with smaller deposits, as the largest increases have been in mortgage products for those with a 5% and 10% deposit.
For those with a 5% deposit the number of mortgage products available has more than doubled in the last two months, from 80 to 192 in early June (and is still rising).
Speaking to an intermediary such as Alexander Hall will help you to identify and navigate these options and most probably be pleasantly surprised at the outcome.
The increased competition amongst mortgage lenders, as illustrated by the rising number of products available, has also led to falling mortgage rates. In fact, there are some fantastic deals now on the market.
For buyers with a 40% deposit there are fixed rates available below 1%, and the five-year fixed rates available are now the lowest ever seen. Rates for those with smaller deposits have also been coming down in recent weeks.
Many of these products are only available via intermediaries. You can check out the best deals available right now via our website .
Please get in touch with us if you need any further advice. You can email us at AskAlexanderHall@alexanderhall.co.uk or use the contact us page on our website – click here.
This article was originally posted in What Mortgage online. You can see the original article here. Please note this will launch a new web page.