Mortgage lenders are shifting their focus to the housing market’s post-pandemic recovery, with the first stamp duty deadline just hours away.
From tomorrow (July 1) until the end of September, the first £250,000 of a property’s value will incur no stamp duty land tax, compared to the more generous £500,000 in place since July last year.
Then in October, the stamp duty threshold will return to its usual level of £125,000, or £300,000 for first-time buyers.
Since July, Rightmove estimates some 1.3m buyers have benefitted from the stamp duty holiday across the UK.
But now, “lenders must pivot their attention to surmounting the challenge of the post-pandemic recovery”, according to Rob Barnard, intermediaries director at Masthaven Bank.
He continued: “The stamp duty holiday has certainly played a part in accelerating activity in the market [since the suspension of activity in the first lockdown] and the end of the tax holiday might well pour some cold water on the hopes of prospective buyers.”
So far, research from Rightmove has suggested, only 4 per cent would abandon their plans to buy a property if they missed either the June or September stamp duty deadline in England.
"We haven’t yet seen any significant increase in properties falling through so it looks like most are going ahead regardless," said Rightmove’s property data director, Tim Bannister.
He continued: "Though inevitably there will be some properties coming back onto the market later this week and next week if a buyer and seller are unable to agree new terms if the buyer misses out on the maximum stamp duty savings."
With stamp duty incentives fast becoming a thing of the past, Masthaven's Barnard said there were “bigger challenges to come”.
“The recent frenetic market activity has been at least partly artificial, driven by the release of pent-up demand and massive levels of government spending in many parts of the economy.”
This "artificial" market, or as Charlotte Nixon, proposition director at Quilter Financial Planning, dubbed it earlier this month, "a false market", means many in the mortgage industry are holding off making any bold predictions on house prices and borrowing levels.
Signs of a dwindling market began in April, when UK house price growth slowed for the first time since the implementation of the stamp duty break in July.
Between March and April, the Office of National Statistics’ latest index showed average house prices on a seasonally adjusted basis fell by 2.2 per cent.
According to other indexes, this trend has continued through to May and June. Nationwide released its latest house price index today (June 30), which found month-on-month growth was still down, having reached just 0.7 per cent in June, compared to 1.7 per cent in May.
Annually, the picture is very different. This month saw house prices grow at their fastest annual rate since 2004. Between June 2020 and June 2021, the average price of a UK home has risen 13.4 per cent to £245,432.
But some in the industry believe stamp duty is far from the only incentive which has been driving these numbers up.
“With many people wanting to move or improve after reconsidering their living arrangements over the last few months, this trend is likely to continue for some time," said Kevin Roberts, director of Legal & General Mortgage Club.
He continued: “After an exodus of workers at the start of the crisis, inward migration is likely to pick up again.”
What's more, the executive cited L&G’s own data, which highlights “a large volume of searches on behalf of international buyers looking to secure a mortgage suitable for someone with a visa”.
But whilst there might be other drivers to prop up the housing market in stamp duty's absence, many have expressed their concerns over how the tax's lower cap will affect first-time buyers.
Digital broker Habito’s mortgage advice head, Will Rhind, thinks the resurgence of 95 per cent loan-to-value mortgage products could go some way to negating its impact on this demographic.
“Banks and lenders have relaunched their mortgage deals for buyers with a 5 per cent deposit and the rates for larger deposit deals are falling,” he explained.
“This means first-time buyers have choices for 90-95 per cent loan-to-value mortgages, which had not been the case until recently.”
Though these products' high barriers to entry could mean they aren't necessarily the cushion the industry expects them to be.
ruby.hinchliffe@ft.com
