The typical mortgage applicant's deposit in December was worth 30.7% of their house purchase price, the highest recorded since October 2013 when the average deposit was 30.9%.
Average deposits in December were £2,249 (3%) higher than in November at £71,078, the highest monthly average and rate of increase seen since May 2014 - the first full month where the market operated under the MMR rules.
The stamp duty changes have also handed some advantage back to buyers by providing them with more available funds. December's average purchase price of £231,487 would only qualify for a £185.13 stamp duty reduction under the new system. But anyone buying a house worth £250,001 paid almost £5,000 (£4,999.98) less since 4 December compared with the old ‘slab’ system.
This meant average stamp duty savings of £1,376.11, or £1,054.41 excluding London. In all but two regions (the West Midlands and Wales), the typical buyer stood to save more than £500 under the new system.
The stamp duty changes also helped to keep mortgage applications buoyant in December, despite the traditional seasonal slowdown. Total applications fell by 28% from November, but were still up by more than a quarter (26%) year-on-year.
Comparing the average cost of house purchase applications across the country in December, the South East is the region where buyers stood to benefit most from the changes in stamp duty. Under the new system, the typical buyers in the region will save £3,870.50 in stamp duty: 4% of the cost of their deposit.
While London’s typical buyer stood to make a greater saving (£4,593.10) under the new stamp duty system, higher property prices in this region mean this saving is less (just 2%) as a proportion of their deposit.
Brian Murphy, head of lending at Mortgage Advice Bureau, said:
"December's stamp duty announcement was an early Christmas present for many aspiring buyers. Having extra funds to put towards a deposit can not only help to limit borrowing commitments and give people more bargaining power. It can also allow access to better mortgage deals at lower LTVs, either at the point of purchase or when it comes to remortgaging at a later date.
"We are yet to see the extent that stamp duty savings are mirrored in higher asking prices, but after a period where credit conditions were squeezed by the new mortgage rules, this fairer tax regime has certainly fuelled buyer optimism about their purchase prospects for 2015.
“The mortgage market has come through a potentially turbulent year intact with good growth prospects for 2015. However, the shift in lending criteria has had a noticeable effect on the shape of the market, particularly at the margins where affordability is most stretched.
“The changes mean the market can grow on a surer footing, and we now have a more sensible approach to stamp duty in place. However, there are still regional pressures and we mustn’t forget the vital support needed by less affluent buyers. Many can still reasonably afford to support a loan even if they have a smaller deposit, so it is encouraging to see a steady stream of new products appearing since the turn of the year.
“It’s likely that we’ll see a further adjustment in 2015 as lenders get more comfortable operating under the MMR and continue offering prudent loans to a broad range of consumers.”
