"Should the rumours be true, and the Chancellor does decide to extend the SDLT holiday by six weeks, I fear that a significant number of buyers will still not be in a position to confidently complete on a transaction."
Of course, such reports need to be taken with a pinch of salt. There are plenty of rumours about what reforms we could see introduced by the Chancellor on 3rd March. Much of this will depend on whether the government decides to use this budget to bring about wide sweeping tax reforms or focus primarily on Covid relief packages and consumers as we look to transition out of lockdown.
Having witnessed first-hand the impact of the SDLT holiday on the property market, there’s no denying the positive impact it has had on residential transactions. Prospective buyers have been able to take advantage of the holiday and enjoy savings of up to £15,000. In turn, this has been driving the rate of house price growth to levels not seen since the EU referendum took place in June 2016. This is all the more impressive when we consider that this has been occurring amidst a global pandemic.
Interestingly, the latest house price indices from Halifax and Nationwide show that the rate of annual house price growth dropped slightly in January 2021. In my mind, this is not due to prospective buyers being dissuaded from new real estate opportunities. Rather, I feel this is due to buyers feeling they will not be in a position to complete on a transaction before the SDLT holiday ends. Part of this delay stems from the practical complications of having finance in place to complete on a transaction. The majority of mainstream lenders are not in a position to deploy finance quickly, particularly when faced with a complicated case.
This was first brought to our attention last year. In September, Market Financial Solutions (MFS) surveyed a sample of prospective homebuyers and homeowners about their overall experiences when it came to buying a property. It was revealed that that a third (32%) of prospective homebuyers had been denied a mortgage when seeking to take advantage of the holiday. Moreover, 46% of those who had bought a property in 2020 said that they encountered significant delays or complications when applying for a mortgage.
Keeping in mind that this research was released in September, so it is likely that the obstacles faced by buyers has increased as the SDLT deadline approaches.
Should the rumours be true, and the Chancellor does decide to extend the SDLT holiday by six weeks, I fear that a significant number of buyers will still not be in a position to confidently complete on a transaction. We could see a surge in enquiries for mortgages, putting additional pressure on lenders who are not in a position to arrange the necessary finance.
While I do support an extension of the holiday, I would like to see this go beyond six weeks. For instance, the Chancellor could set the date for early July, thereby allowing the holiday to run its course for a full 12 months. This would also give buyers the ability to plan accordingly.
Either way, it is vital for both mainstream and alternative finance lenders to ensure their credit lines are topped up and their team is ready to receive a potential surge in cases. Part of the SDLT holiday’s success is due to the commitment shown by some lenders to work with their clients and deliver loan solutions that suit their needs. For this reason, prospective buyers and the brokers who represent them need to ensure they engage with lenders with a proven track record of deploying loans quickly, backed by access to credit lines.
For now, we must wait until the 2021 Spring Budget is delivered on 3rd March.
