First-time buyers rush to beat stamp duty deadline
As the end of the stamp duty holiday for first-time buyers approaches, property rookies are rushing to buy.
First-time buyers are currently exempt from paying stamp duty on properties worth up to £250,000. But on 24 March the tax comes back in with people having to pay 1% of the value of a property worth between £125,000 and £250,000 to the taxman. Properties worth over £250,000 incur increasing levels of stamp duty depending on value, while properties valued at under £125,000 will remain exempt.
Data from the Council of Mortgage Lenders (CML) shows there was a marked increase in the number of people hoping to get on the first rung of the property ladder in December. There were 18,700 loans advanced during the month to first-time buyers, worth £2.3 billion, up 7% in volume and 10% in value on November.
There was also an increase in the proportion of properties (from 50% to 53%) bought by first-time buyers within the price band currently exempt from stamp duty, suggesting they are beginning to rush through purchases before the exemption ends.
First-time buyer flow
"We have been expecting a flow of first-time buyers into the market as the stamp duty exemption ends in March, and December’s figures appear to show this has now begun," says Paul Smee, director general of the CML.
In contrast, the number of loans made to existing homeowners decreased from 29,300 worth £4.8 billion in November to 28,700 worth £4.6 billion in December.
On the whole, 2011 was a mixed year for the mortgage market. Remortgage lending rose by 17% to £47 billion compared to 2010, while house purchase lending, at £75 billion for the year, was down 6% on 2010.
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.