New Stamp Duty Thresholds Increase Costs for Home Buyers in England and Northern Ireland
Significant reductions in stamp duty discounts impact first-time buyers and home movers as transaction volumes rise ahead of the deadline.
Stamp duty discounts in England and Northern Ireland have been significantly reduced, increasing the financial burden on many home buyers.
From April 2024, the 'nil rate' threshold for first-time buyers is reduced from £425,000 to £300,000, while the threshold for home movers is halved from £250,000 to £125,000.
This change comes as Bank of England data indicates a decline in mortgage approvals, with the number of approvals for house purchases dropping to approximately 65,500 in February, a decrease of around 600 from January 2024, marking the lowest figure since August 2024.
Richard Donnell, executive director at property website Zoopla, noted that the slowdown in mortgage approvals is a consequence of a rush to complete transactions before the new thresholds take effect.
He anticipates a recovery in approvals toward 80,000 a month as normal market conditions return, highlighting a 5% increase in sales agreements year-over-year that is expected to drive demand for mortgages.
Zoopla projects that the proportion of first-time buyers liable for stamp duty will increase from 21% to 42% following the changes, while the percentage of existing homeowners purchasing new homes subject to the tax will rise from 49% to 83%.
Data from HM Revenue and Customs (HMRC) suggests a recent surge in transactions, with an estimated 108,250 home sales occurring in February 2024, which is 28% higher than February 2023 and 13% above January 2024 levels.
Experian has reported a 32% increase in mortgage applications in the final quarter of 2024 relative to the same period in 2023, indicating consumer resilience in the face of changing market conditions.
Reports indicate that around 25,000 first-time buyers and nearly 74,000 home movers in England are expected to miss the stamp duty deadline, completing their purchases in April.
Rightmove's analysis shows that only 9% of homes currently on the market in London fall below the new £300,000 threshold, a sharp decline from 27% under the previous limit.
In contrast, the North East of England still has approximately 74% of homes listed below the new threshold, down from 87% previously.
In response to the fiscal changes, some lenders are introducing new mortgage products aimed at assisting buyers who will face the increased stamp duty costs.
Yorkshire Building Society has launched a mortgage plan offering up to £6,250 cashback for first-time buyers, while Nottingham Building Society and Skipton Building Society are similarly rolling out cashback offers.
Santander UK announced a revision of its mortgage affordability criteria, potentially enabling some borrowers to access between £10,000 and £35,000 more, contingent upon individual financial assessments.
Despite the adjustments in stamp duty, average mortgage rates have remained stable, reflecting a generally improved outlook compared to the previous year.
However, uncertainty persists regarding future movements in Bank of England interest rates, particularly concerning potential rate cuts in May or June.
Industry experts highlight the necessity for buyers nearing the end of their fixed-rate mortgage deals to consider their options in light of current market competition, as lenders seek to offer more attractive rates.
From April 2024, the 'nil rate' threshold for first-time buyers is reduced from £425,000 to £300,000, while the threshold for home movers is halved from £250,000 to £125,000.
This change comes as Bank of England data indicates a decline in mortgage approvals, with the number of approvals for house purchases dropping to approximately 65,500 in February, a decrease of around 600 from January 2024, marking the lowest figure since August 2024.
Richard Donnell, executive director at property website Zoopla, noted that the slowdown in mortgage approvals is a consequence of a rush to complete transactions before the new thresholds take effect.
He anticipates a recovery in approvals toward 80,000 a month as normal market conditions return, highlighting a 5% increase in sales agreements year-over-year that is expected to drive demand for mortgages.
Zoopla projects that the proportion of first-time buyers liable for stamp duty will increase from 21% to 42% following the changes, while the percentage of existing homeowners purchasing new homes subject to the tax will rise from 49% to 83%.
Data from HM Revenue and Customs (HMRC) suggests a recent surge in transactions, with an estimated 108,250 home sales occurring in February 2024, which is 28% higher than February 2023 and 13% above January 2024 levels.
Experian has reported a 32% increase in mortgage applications in the final quarter of 2024 relative to the same period in 2023, indicating consumer resilience in the face of changing market conditions.
Reports indicate that around 25,000 first-time buyers and nearly 74,000 home movers in England are expected to miss the stamp duty deadline, completing their purchases in April.
Rightmove's analysis shows that only 9% of homes currently on the market in London fall below the new £300,000 threshold, a sharp decline from 27% under the previous limit.
In contrast, the North East of England still has approximately 74% of homes listed below the new threshold, down from 87% previously.
In response to the fiscal changes, some lenders are introducing new mortgage products aimed at assisting buyers who will face the increased stamp duty costs.
Yorkshire Building Society has launched a mortgage plan offering up to £6,250 cashback for first-time buyers, while Nottingham Building Society and Skipton Building Society are similarly rolling out cashback offers.
Santander UK announced a revision of its mortgage affordability criteria, potentially enabling some borrowers to access between £10,000 and £35,000 more, contingent upon individual financial assessments.
Despite the adjustments in stamp duty, average mortgage rates have remained stable, reflecting a generally improved outlook compared to the previous year.
However, uncertainty persists regarding future movements in Bank of England interest rates, particularly concerning potential rate cuts in May or June.
Industry experts highlight the necessity for buyers nearing the end of their fixed-rate mortgage deals to consider their options in light of current market competition, as lenders seek to offer more attractive rates.
