The housing market has slowed, not least because of changes to stamp duty. Emma Knapp, expert mortgage adviser, considers the pros and cons of cutting out stamp duty for those looking to take their first steps onto the property ladder.
The upfront costs that come with buying a home have increased considerably in the last few years and much of the rising cost is due to changes in stamp duty and increasing property prices. Many experts believe these factors have played a part in the housing market slowing slightly.
Cutting stamp duty to zero for first time buyers is one of the moves Chancellor Philip Hammond is expected to announce in his Autumn Budget on 22 November 2017. Such a cut would certainly be a welcomed cost-saving measure at what is an already expensive time, and many believe the predicted measure forms part of a bigger plan aimed at easing the housing crisis.
Critics of stamp duty believe that this tax puts pressure on the housing market by reducing the number of overall transactions. According to a political correspondent for the Telegraph, helping the younger buyers now could give the British economy a £10 billion boost.
On the other hand, those against a cut argue that as stamp duty is tiered depending on property value it mainly penalises those buying expensive properties, generating billions in annual revenue in the process.
According to Rightmove, the average price paid for a property purchased by first time buyers in London is currently a whopping £422,380. If there were no stamp duty payable, it would save them £11,119 – the cost of a deposit in some parts of the country.
Commenting on budget predictions, Charles McDowell, commercial director at challenger bank, Aldermore said recently:
“With the property market at risk of coming to a standstill, we would welcome any plans, temporary or otherwise, that reduce stamp duty. This would be particularly beneficial for first-time buyers who are struggling with an overly complex and costly system.”
This tax however may not be “axed” completely or even permanently. It may be a temporary ploy to encourage people to buy property sooner rather than later.
Some experts have even suggested making stamp duty a seller’s not buyer’s tax. This would benefit first time buyers and possibly any sellers who may be upsizing as the amount calculated would be based on the home they’re selling rather than the more expensive one they’re buying.
For all the pros that might be afforded to first time buyers, inevitably, others would be left out of pocket and faced with an extra tax bill. For example:
- Those who are hoping to downsize
- Those selling an additional/second property who have been planning to use the funds as part of their pension strategy.
Some argue that transferring the tax from buyers to sellers would push up asking prices again as sellers would seek to cover the cost which completely defeats the object of the plan!
The Budget aside, if you are looking at purchasing your first property and need help finding a suitable mortgage do get in touch. We’re particularly good at help those who think they can’t get a mortgage! Why not give me a call to find out where you stand? I can help you to:
- Work out how much you can borrow
- Get your paperwork in order
- Understand where you stand from a credit check perspective
- Find out more about Help to Buy schemes
All initial advice is free of charge and without obligation, so you have nothing to lose by getting in touch and everything to gain by getting prepared!
Emma Knapp has left Mortgages for Business for pastures new. For more information or for any questions relating to this blog, please contact the Residential Team on 0345 345 6788, where one of our consultant mortgage brokers will be happy to assist.
ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.