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AMI and IMLA warn of property chains collapsing without phased stamp duty deadline

  • 18/12/2020
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AMI and IMLA warn of property chains collapsing without phased stamp duty deadline
Two mortgage industry trade bodies have warned maintaining a hard stamp duty deadline risks property chains collapsing as buyers pull out of deals to avoid paying thousands of pounds in tax they may not be able to afford.


The Association of Mortgage Intermediaries (AMI) and Intermediary Lenders Association (IMLA) issued a joint statement warning the UK home buying market is at a critical stage and that “it is now likely that many cases will not complete before 31 March”.

IMLA and AMI said they had raised their concerns with the Treasury, noting that a large number of borrowers may not be able to meet the March deadline through no fault of their own with unprecedented demand putting immense pressure on lenders, intermediaries and conveyancers.

Delays in obtaining searches are being combined with complex chains and firms’ capacity to operate in a Covid-safe way.

“The market has processed record levels of new applications from buyers while managing the varied and continuing impacts of Covid-19 on their businesses,” they said.

“Once mortgage offers are issued and borrowers move on to try to achieve exchange and eventually completion, the pressure moves on to conveyancers, who are also facing record volumes of business.”


Widespread collapse in property chains

They issued a stark warning about the potential risks to borrowers and the likely knock-on effects on the market.

Those buying properties for less than £500,000 will pay no stamp duty if they complete in time.

However, if they miss the date they will be liable to pay the tax on the value of the property above £125,000, or over £300,000 for first-time buyers.

“The result could be that borrowers are forced to borrow more funds to cover the costs of stamp duty, at a time when they may be stretched on their mortgage loan and additional borrowing may not be available,” the bodies continued.

“We are concerned that the tax exemption cut-off with no taper could see a widespread collapse in property chains if buyers who planned to take advantage of the stamp duty holiday have not completed before 1 April 2021 and are forced to withdraw.”


‘No plan to extend relief’

IMLA and AMI join fellow trade bodies the Building Societies Association (BSA) and the Association of Short Term Lenders (ASTL) in calling for the taper to soften the cut off.

However, earlier this week HM Treasury confirmed it was not planning an extension to the stamp duty holiday deadline.

“As the relief was to provide an immediate stimulus to the property market, the government does not plan to extend this relief,” Treasury said.

“Stamp Duty Land Tax (SDLT) is an important source of government revenue, raising several billion pounds each year to help pay for the essential services the government provides.”


Borrowers must prepare to pay

IMLA executive director Kate Davies warned borrowers to be realistic about what will happen if they miss the 31 March cut-off date and to plan ahead.

“Those who do miss it will need to be aware of how much stamp duty they may be liable to pay – and have a plan for finding that cash,” she said.

“If they can’t – there is a risk that their sale may fall through – taking with it a number of other transactions if there is a chain.”

She added that lenders, intermediaries and conveyancers will be as upfront as possible with borrowers and manage their expectations.

“We are asking all our members to work to increase post offer operational support, and our broker and conveyancer partners to assess their new business pipelines,” Davies continued.

“This will ensure as many complete before any deadline.

“We want to avoid borrowers losing out – through no fault of their own – and have called for some flexibility to the deadline which would ease the immediate pressure on lenders and conveyancers, and treat borrowers whose cases are already in the pipeline more fairly.”


Brokers should assess pipelines

AMI chief executive Robert Sinclair added: “As the main contact point for the consumer at the sharp end of this, brokers will work hard to keep the consumer informed and warn them of the potential risks they face.

“We are calling on lenders to ensure their conveyancer partners have capacity to deal with the pipeline in front of them.

“I would like all lenders, brokers and conveyancers to assess their pipelines and operational capacity between now and the end of March and give a realistic assessment to their customers of the likely outcomes.

“By working together now we can minimise disappointment. However, I firmly believe with what is already in the legal process, government needs to stand ready to extend the deadline to avoid there being thousands of frustrated and disappointed taxpayers.”

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