Stamp duty relief – a relief for the mortgage market?
Helping people buy a home, the Government has announced it is suspending stamp duty on properties costing £175,000 or less.
Given today’s concerns about loans, debt and mortgages, it wouldn’t be too surprising to see prices just over that limit dropping to just below that limit. If two very similar houses were for sale:
- Someone buying ‘House A’ for £175,100 would pay £1,751 stamp duty.
- Someone buying ‘House B’ for £175,000 would pay £0 stamp duty.
Whoever buys ‘House B’ will have almost £2,000 ‘extra’ to put down as a deposit – and these days, that could make a huge difference to the interest rate on their mortgage. It could even make the difference between finding a mortgage and being turned down by every mortgage provider they approach.
What is stamp duty anyway?
‘If you buy a property in the UK over a certain purchase price you have to pay Stamp Duty Land Tax (SDLT) - previously known as Stamp Duty. This is charged on all purchases of houses, flats and other land and buildings.’
Directgov.co.uk
Before this relief was announced, SDLT was charged at 1% on most properties purchased for £125,000 - £250,000 (it’s 3 or 4% for more expensive properties, and 0% for cheaper ones). For the next year, though, homebuyers won’t have to pay SDLT on a purchase unless it’s worth more than £175,000.
Is this scheme a good idea? Will it help people get mortgages?
The Treasury seems to expect about half a million homebuyers to benefit from the change. However, the Council of Mortgage Lenders (CML) urged the government ‘to focus on the mortgage funding markets as much as on the consumer-facing initiatives announced today’.
After all, it’s the difficulty of finding a home loan (mortgage) that’s putting many would-be homebuyers off*. Someone viewing a £150,000 property might be pleased to ‘save’ £1,500, but this won’t necessarily help them get a mortgage.
According to Michael Coogan, director general of the Council of Mortgage Lenders: “until more funding is available we are still some way from restoring long-term stability to the housing and mortgage markets.”
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* Finding the right mortgage depends on talking to the right company. Think Money works with a panel of mortgage lenders to provide a wide range of mortgages for people with all kinds of financial backgrounds.