Stamp duty cut is good news for homebuyers

WHAT will the stamp duty cut and interest rate rises mean for Newbury homeowners and landlords?

The Bank of England recently increased interest rates to 2.25 per cent with further increases expected in the coming weeks, making monthly mortgage payments more expensive for first-time buyers and homeowners coming off their fixed rate mortgages in the coming months.

Industry statistics show around 1.3 million homeowners are coming off their fixed rate in the next 12 months.

In real terms on a £260k mortgage (initially over 25 years, now with 22 years remaining) payments would go up from £1,017 per month to £1,548.

That’s quite a rise and potential blow to household budgets.

However, by pushing back the repayment term from 22 years to, say, 35 years, which reduces the payment to £1,120 per month – something to consider if you are remortgaging in the coming 12 months.

What will the stamp duty changes mean for property owners?

PM Liz Truss and chancellor Kwasi Kwarteng believe that cutting stamp duty will support economic growth by encouraging more people to move home or jump onto the property ladder.

The chancellor doubled the zero-rate stamp duty band from £125,000 to £250,000, passing a stamp duty tax saving of up to £2,500 for all English homebuyers.

Tax savings are even more significant for first-time buyers, particularly in areas with high house prices, such as London and the south east.

They can save a maximum of £11,250 in stamp duty – with a new zero-rate band of £425,000, based on a higher £625,000 spend cap Unsurprisingly, most housing transactions in Newbury were above the £250,000 threshold, yet irrespective of that point, it’s a saving of up to £2,500 for all future homebuyers. Anyone currently buying a house and not yet completed on their purchase will be in line to make this saving.

Similarly, landlords purchasing buy-to-let properties will also save money with the stamp duty cut (but they will still be liable for their second home stamp duty levy of three per cent).

Overall, this is a welcome move to help the property market.

What will happen to house prices?

Many economists believe the number of property transactions is a far more accurate bellwether for the health and potency of the local housing market.

A greater number of people moving home is better for the whole economy.

On a local level house prices have risen 15.7 per cent over the last five years and at Downer & Co we have had a record year, with more transactions than ever before.

With the combination of the price cap on energy bills, the stamp duty change, the reversal of the rise in National Insurance and the drop in Income Tax, these measures should mitigate a drop in house prices.

Yet, I foresee a ‘slight’ realignment in the house prices being achieved in 2023, compared to 2022 and potentially fewer property transactions. With all these recent changes we continue to see strong demand with a move by Christmas on buyers’ minds.