Back in July, the Chancellor gave a boost to the beleaguered housing market by announcing a Stamp Duty holiday. Residential buyers who complete on a property purchase before 31 March 2021, won’t pay any Stamp Duty on homes valued up to £500,000 and, for more expensive homes, the Stamp Duty will only be paid on the value above half a million pounds.
This tax break has been one of the reasons why UK house prices have hit record highs over the past few months. However, property companies are now warning that up to 200,000 people risk missing out on Stamp Duty savings of up to £15,000 because of backlogs in the property market.
The Telegraph recently reported that individuals who agreed to buy a home at the end of October only have a 50/50 chance of getting the transaction through before the Stamp Duty holiday ends.
With one in four house sales collapsing in October, and this number set to increase in the coming months, it’s vital that you understand the issues and work with a professional to make sure your purchase or sale goes through on time. Here’s why.
Half of sales might not complete
Figures from property consultancy TwentyCi show that around 150,000 property sales are currently being agreed each month – around 50% more than usual.
While it ordinarily takes three months from agreeing a sale to completing the transactions, the consultancy believes that current delays mean that this time would increase to just over five months – pushing many people past the 31 March 2021 Stamp Duty holiday deadline.
The firm’s Stuart Ducker said: “Allowing for a Christmas break, this suggests that half of sales agreed from October 22 will not go through by the end of March.”
Prices could fall, and chains could collapse
There are two main consequences of thousands of buyers missing the deadline:
- Prices could fall. Many buyers will seek to negotiate the price of a property down by the amount of Stamp Duty they have to pay, meaning sellers may be forced to accept up to £15,000 less for their property
- Sales and chains could collapse. After the deadline for the Stamp Duty holiday has passed, there will be many buyers who simply can’t afford to continue with the transaction. This could see buyers pull out, and chains collapse. This could be a particular issue because home movers have overtaken first-time buyers as the most dominant groups of buyers in the market.
Lenders and conveyancers causing many delays
While property sales may be booming, lenders, surveyors, and conveyancers – many of which are running at reduced capacity – are struggling to cope.
Delays have mainly been down to:
- Difficulties in completing local searches.
- Conveyancers and surveyors struggling with increased numbers in the current difficult working environment. Beth Rudolf, of the Conveyancing Association, says: “Our members are working 12-hour days trying to keep on top of the work. Some won’t accept new instructions.”
- Mortgage processing times increasing. Banks withdrawing deals has concentrated demand and those lenders still in the market have been inundated with applications.
How working with an expert like Altura can benefit you
As we noted above, one of the reasons why many buyers are struggling to progress transactions is because mortgage lenders are struggling under the weight of applications. This has led to severe delays in underwriting applications and processing mortgage offers.
One of the ways that you can avoid this problem, and ensure your purchase completes in a timely fashion, is to work with a professional. We’ve met with many clients in recent weeks looking to take advantage of the Stamp Duty holiday who want to ensure that they get everything completed in plenty of time.
One of the skills of a good mortgage broker is not just to find the right deal for you, but also to recommend a lender who can work to your timescale. If you must complete on a purchase in a few weeks, it’s no use choosing the ‘best buy’ rate and waiting for two months for your mortgage offer. You could lose the property.
Here’s an example. You want to buy a property valued at £600,000 and borrow £450,000.
At the time of writing, the ‘best buy’ two-year fixed-rate mortgage deal is 1.59%, meaning you’d pay around £1,819 assuming a repayment mortgage over 25 years. However, as the ‘best buy’ lenders are currently inundated with applications, you might wait weeks or months to get this agreed.
Altura’s quickest lender, however, has recently produced full mortgage offers in as little as a week. Their best two-year fixed-rate deal is at 1.96%, meaning the repayments on the same mortgage would cost £1,899.
While you might pay £1,920 more in interest over the two years, you would potentially save £15,000 in Stamp Duty by ensuring your purchase completed on time.
Get in touch
Buying a UK property before 31st March 2021 could mean you benefit from significant tax savings. If you want to make sure that your transaction goes smoothly, please get in touch. Email info@alturafin.com or call us on +44 (0) 20 3786 7270.
