The last month, and the rumours coming out of Government, will present some interesting dilemmas for all those potentially seeking to close a housing transaction up until the next Budget announcement.
With the Government/HM Treasury apparently considering the wholesale abolition of the stamp duty system, replacing it instead with a property tax to be paid by sellers on properties valued over £500,000, how might buyers now approach their own transaction?
Regardless of what you are purchasing, if you are going to be paying stamp duty, then you might well consider hanging back and waiting to see what the Chancellor does announce in October/November.
We know that many buyers are also sellers, and there will be those who can’t avoid a tax payment if they are selling over £500,000, but we should also be acutely aware that £500,000 is approximately twice the average national house price in this country, which means that it’s going to (literally) pay to wait to see if you can avoid any sort of transaction-based property tax at all.
I read some interesting statistics out of Zoopla at the tail-end of August which put this into perspective, particularly if you are a first-time buyer and you are currently having to put money away for stamp duty, which could of course be better utilised within the deposit.
After the Government reliefs on stamp duty were taken away at the end of March, we now have a situation where 83% of all buyers pay stamp duty when they purchase, compared to 49%. For first-timers, while 20% of all buyers were paying stamp duty prior to April this year, that number has risen to 41%.
Zoopla suggests this shift ‘has reduced demand and slowed house price growth since April, showing the impact of higher tax on the wider market’.
The fact the Government is considering (overdue in my opinion) such a radical reworking of the property taxation system is instructive in itself, and it may well be that if stamp duty is abolished, then we will see a real boost to the housing market and the number of transactions taking place.
But, what we must also countenance is that by leaking such a possibility, there is a very good chance the market effectively shuts down until we get total clarity in the Budget, which is two months away. That is certainly not ideal, even if the positives after an announcement could be strong.
Certainly, if you’re a first-timer looking at the potential stamp duty saving, why wouldn’t you at least wait to see what that announcement would be? I suspect that as September progresses, we will see the true impact of this summer leak on transaction numbers and the Government will have to provide clarity sooner rather than later.
Clearly, if first-timers (indeed all purchasers) are spared stamp duty, that will be a real bonus, and there is further good news this month in terms of the number of high LTV products available to those who have smaller deposit levels.
Each month, I review the number of high LTV mortgage products available to first-time buyers based on the monthly average Nationwide house price.
In August, the average price had dipped month-on-month by 0.1% to £271,079, which would require a 5% deposit of £13,554.
Product choice at 95% LTV has continued to increase – up from 307 last month to 313, with 285 fixes and 28 trackers, variable or discount offerings.
In terms of the variable best buys, Newbury has re-emerged with its three-year discount at a market-leading 4.04%, with Bath offering a two-year discount at 4.89% and Furness with a 4.99%.
For fixes, in the five-year space, we have Progressive and its Northern Ireland-only 4.53% deal, Monmouthshire with its 4.6%, Furness with 4.65% and Leeds with 4.66%. Building societies clearly targeting this space and highlighting the importance of the mutuals in terms of supporting high LTV borrowers.
For two-year fixes we have Lloyds with a 4.66% deal, while Leeds offer a 4.68% product and Monmouthshire have a 4.7% mortgage available.
Finally, each month I also look at product availability in the 100% LTV space – this month we have seen an improvement, up from 16 last month to 21 products, with Lloyds and Halifax offering a 4.45% three-year fix, the Progressive offering a 4.6% five-year fix, while the Vernon has its lifetime discount product now available at 5%.
All in all, a positive move forward in the high LTV space, however for those purchase transactions currently being worked on, with completion dates before the end of October, how many individuals might be asking their conveyancers to ease back in order to see what the Government might announce in the Budget?
I suspect a large number because clearly the money to be saved could be sizeable and who wouldn’t rather have that money available to use, or be able to add it to the deposit, rather than giving it to the Treasury?
