FIRST-time buyers could end up paying thousands of pounds extra in stamp duty due to huge house buying delays.
The clock is ticking for aspiring owners hoping to take advantage of a higher stamp duty threshold before it is set to fall again in April 2025.
A number of mortgage brokers have told The Sun that huge delays to house sales at the moment mean buyers could end up missing out.
Under the current rules, first-time buyers don’t pay stamp duty when buying a home worth up to £425,000. If a property is more expensive they only pay tax at 5% on the portion above £425,000 and up to £625,000.
The lower limit for stamp duty exemption was temporarily raised in 2022 but is due to shift back down to £300,000 in April next year.
The change could raise the cost of buying a home by thousands of pounds for those taking their first step on the ladder.
There is a real risk that if a buyer has not found a property, got it under offer and began the completion process in the next few months, they may well lose out on the stamp duty incentive
Martin Stewart
For example, someone buying a property priced at £425,000 wouldn’t pay any stamp duty at all currently, but the same sale after April next year would mean a stamp duty bill of £6,250.
Those caught out at the last minute could face financial difficulties, which could lead to some house sales falling through at the last minute, brokers warned.
Martin Stewart, broker at London Money, told The Sun: “The problem with cliff edges is that tend to arrive when you least expect them.
“Many will have lost sight of this particular one due to the distraction of the general election.
“Recent economic news about £20billion black holes in our finances is further proof that the housing market is unlikely to receive any boosts in the months ahead.
“So this really is a buy now while you can situation for first-time buyers.”
He added: “The matter is further complicated by the fact the process of home buying is now taking much longer than it used to.
“There is a real risk that if a buyer has not found a property, got it under offer and began the completion process in the next few months, they may well lose out on the stamp duty incentive.”
Mr Stewart said delays have gotten worse since Covid when slower processes created backlogs. He cited conveyancing, fragile chains and cautious lenders among the factors slowing down transactions.
Chris Sykes, from brokers Private Finance, added that he has also seen some sales are taking longer than usual.
“I’ve got cases on my desk still that were initially placed in November 2023,” he told The Sun.
Another broker agreed that this the deadline could catch buyers out.
Independent broker Lewis Shaw said: “First-time buyers could easily find themselves hit with a double whammy of higher house prices towards the end of this year and then having to find the cash to pay stamp duty when their budgets are already thinly spread.
“We’ve known the stamp duty exemption was due to end in 2025, yet few buyers have heeded this warning.”
The time it takes tom complete on buying home entirely depends on the individual circumstances
Buying a newbuild could take longer as lenders are typically more cautious around these properties – plus you could be hit by delays in the building process if it’s not yet finished.
If your income is more complex, for example, if you’re self employed, you could also find there are more questions to answer from lenders.
The legal and broker firms you choose to use can make a big difference too.
Generally speaking, you should expect a process to take around three months, according to Nicholas Mendes from broker John Charcol.
This can be faster if you’re a first-time buyer, though, as you don’t have a chain holding you up – and this can put you in a position of power to haggle and demand speed.
Mr Sykes said: “I’ve seen first-time buyers take a fair amount off the purchase price in cases where families are selling property of deceased loved ones, where the sellers are moving abroad and have a specific timeline, or really any situation where there is a deadline that needs to be met quickly.”
Mr Mendes added that relationships between brokers and other factors in the chain can delay the process, so choosing a proactive broker with good relationships can determine how long your house purchase takes.
“We have client relationship managers which chase the lender and solicitor every two days meaning we push through deals quickly, but other brokers don’t have this, which can mean delays,” he said.
Brokers have warned that while you should look to complete on your property before the stamp duty deadline if you’re absolutely certain about it, you shouldn’t be pushed into making a purchase you could later regret.
Dan Knott, a mortgage adviser at Active Financial and on Instagram @Dandoesmortgages, said: “Although buyers may feel like the clock is ticking, it is essential that buyers don’t rush into a purchase and ensure a property is right for them.
“If stamp duty costs will impact the size of your deposit, a mortgage adviser can discuss this with you.
“An adviser will chat through your circumstances, goals and budget to give an understanding of what you can achieve in both scenarios dependent on which side of the April 2025 changes your purchase falls.
“This will allow buyers to make an informed decision.”
He added: “Although, the date of a mortgage application is not directly linked to a stamp duty deadline, having a mortgage offer in place as early as possible will help to avoid any unnecessary delays.”
You can get a mortgage offer in place around six months ahead of completing on a property.
If rates fall in the mean time, you can reapply to try to get a better deal.
IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.
