Stamp Duty relief for first-time buyers on houses between £125,000 and £250,000 is due to end next month, on 24 March.
There is a lot of talk that, with the market as tight as it is, the re-introduction of Stamp Duty will make it impossible for first-time buyers to get on the housing market.
However, while it does impose another challenge, our housing market and its buyers are more resilient than that.
Deadlines like this do create a level of impetus, which can even be seen as positive in some ways. If a benefit is about to end then there is usually a rush of people wanting to take advantage of the benefit while it is still in place.
Anything that changes the mentality and creates and impetus to buy is a good thing, as it stirs people up and deals with consumer apath.
It is very likely, therefore, that we will see a rush of first-time purchases in the next month of houses in this price band – and this is something that advisers can capitalise on in the month that is left by targeting their marketing and contacting those clients and potential clients that may well be affected.
However, while a rush in purchases in the next month will help to ensure that advisers have had a sound and positive start to the year, it is unlikely that this will mean there are more first-time buyers.
It would be an unusual person who would suddenly decide to buy a house that they weren’t planning to just because Stamp Duty was about to be re-imposed.
What the end of the holiday is more likely to do is bring forward the plans of people who may otherwise have bought later in the year.
This is exactly what happened in March 2010, when Stamp Duty was raised on properties of £1m and more. Dates like this impose false deadlines and there were a rush of purchases before the cut off and a lull in activity a few months afterwards.
Following April, however, it does not mean that the first-time buyer market will completely grind to a halt.
First-time buyers are remarkably resilient and there is still a huge desire to get on to the housing ladder. Even without Stamp Duty relief, there are lots of schemes that are not exploited as much as they could be, such as guarantor schemes, key worker schemes and the government’s new housing schemes.
Guarantor schemes and parental help are at risk of making a two-tier market place between those people with families who have equity that can be released from their property and those who are reliant on their own income.
Yet, the positive is that there appears to be a growing number of people who have benefited from the housing market boom of the last two decades who are now prepared to help family members to take their first step onto the housing ladder.
One of the key factors for first-time buyers is advice and not just advice at the point that they are ready to buy and take out a mortgage, but advice very early in the process when they are just starting to save for a deposit.
The difference between getting a mortgage or not rests more than ever on a person’s credit rating.
Mortgage advisers often see a potential borrower very early in the process when they are still saving for a mortgage, so advice at this point could be crucial, particularly advice regarding keeping their credit rating in order and not delaying making a payment for a mobile phone bill or money owed to a catalogue.
These payments can seem so small and unimportant to a borrower compared to a mortgage, but it is on these things that a mortgage can now be accepted or declined.
Taking the wider view of the Stamp Duty issue, it might affect the market much less than we think.
Anyone buying a property of under £125,000 will not be affected and this includes many first-time buyer homes.
While there is much press coverage about runaway house prices in London and the South East, in many other parts of the country house prices are significantly lower and so much fewer house transactions will be affected.
As a result, Stamp Duty is likely to affect people more in the South East and the other pockets around the country where house prices are higher.
Taken as an overall proportion of the housing market, however, the amount of money leant to first-time buyers in the bracket about to be affected by Stamp Duty is relatively small, so the issue needs to be put in the context of the amount of money that is lent each year.
In light of the total market, it is only around the margins that this will make a major difference.
