It’s the highest number of transactions ever recorded by HMRC in a single month and represents a 220 per cent increase on June 2020, following the three month closure of the housing market as the pandemic took hold.

Although the stimulus of the stamp duty holiday and dearth of house sales at the beginning of the pandemic has exaggerated the rise in sales activity, comparing activity to June 2019 still reveals a 100 per cent increase.

The effect of the stamp duty holiday which made the first £500,000 of a residential property purchase price free of land tax can also been seen in March, when the relief was first due to end.

House sales in the month soared to 183,830 from 145,110 in February.

During the March Budget, Chancellor Rishi Sunak announced an extension to the relief until the end of June before the stamp duty holiday would begin to taper off.

The return to normality

From 1 July to 30 September the nil-rate threshold reduces to £250,000 before resuming to its normal level of £125,000 from 1 October.

Sarah Coles, personal finance analyst, Hargreaves Lansdown, said: “The red-hot property market hit a blistering peak in June, as frenzied buyers raced to complete on their new home before the stamp duty holiday tapered at the end of the month. The question is whether the overheated market means buyers have been burned.

“Unfortunately for these buyers, sellers didn’t hit the market in the same kind of numbers. There’s been a huge imbalance between buyers and sellers during the spring and early summer, which has meant panic buying, bidding wars, and the return of gazumping.

“When the market cools, buyer remorse tends to kick up a gear. The RICS survey in June showed agents expected sales to slow through the summer and into the autumn. Price rises are already showing signs of slowing, and there’s even the potential for them to take a step back if the economy is struggling with new variants when furlough is withdrawn.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “As always, it is transactions rather than the more volatile prices which are a better measure of housing market health. These figures clearly illustrate the frenzied rush to the finishing line for buyers to take advantage before the stamp duty holiday drew to a close.

“However, activity has reduced since, particularly in London, where the savings were greatest. Early signs are that sales will be down significantly but we have noticed nearly all of our transactions are continuing with very few renegotiations. This leads us to believe prices will not be markedly different over the next few months.”

Not so for the housing market, though, as this has remained open for business and has in fact delivered year-on-year growth. 

There were 50 per cent more transactions in Q1 2021 than the same period in 2020, before Covid-19 had made its effects known. This surge in homebuying has without a doubt been fuelled by the government’s stamp duty holiday. 

It’s clear that the holiday’s stated aim has been achieved – it was designed to stimulate activity, and that’s exactly what happened. However, some in the industry have been critical of the tax break, arguing that higher levels of demand drove prices up and cancelled out the savings it delivered.  

While it’s true that prices were probably driven up, the conclusion that the holiday’s benefits have been erased is wrong. What the holiday has done is democratise homeownership by reducing the amount of upfront capital needed to get on the property ladder. 

Industry rewards 

For brokers, the holiday has injected huge volumes of business into the market.  

Brokers’ primary aim is to help clients get the keys to a new home, and lowering the financial requirements at the start of the journey has made that task easier. Budgets were stretched further and buying power was increased, and their advisory role was more important than ever in helping clients to get the best deal.  

First-time buyers were some of the biggest beneficiaries, and those most in need of broker advice, so the holiday not only helped them but created more demand for intermediary services. 

A case for technology adoption 

That demand has had a similar effect for tech providers, as greater need for advice put broker workloads under strain. In particular, the ability to quickly adopt and roll out a solution became more and more important, and the providers which were best able to do this experienced the best results. 

They key challenge for providers as the sector moves back to normality is to ensure that momentum doesn’t dissipate. Adoption has skyrocketed, but if a drop in demand is brought by the final tapering of the stamp duty holiday progress might be lost. 

What the holiday has done is shown that brokers are receptive to technology when it makes a tangible difference to how well they can do their job and how well their business can perform.  

Therefore, we have to say that its impact has been positive for tech providers, even if their challenge will continue beyond its end. 

That said, brokers and tech providers aren’t the only ones needed to play ball if the benefits of the holiday, and the interesting lessons it has taught us, are to be carried forward.  

The relationship between lower stamp duty land tax and higher activity rates is clear, and if it were to continue in some form, the housing market’s post-Covid boom may become a long-term trend rather than just a flash in the pan.   

The new report, Lessons From The Stamp Duty Holiday, drew on surveys of lenders brokers and customers, a review of evidence of the effects of the tax holiday and data on transaction volumes as well as the Treasury’s tax take.

Of the 40 brokers surveyed, 53 per cent believed stamp duty on housing transactions should be scrapped permanently. Their comments included “it needs restructuring,” and “it’s just theft by government”.

But 22 per cent of the lender’s intermediaries disagreed, believing such a move would disrupt the market. They said: “Anything that artificially inflates house prices is not good for the market.” Also: “It is fuelling unsustainable house price rises.”

The tax break was also seen as having negatively affected first-time buyers, and at the same time, benefiting buy-to-let portfolio holders.

Some 50 per cent of intermediaries said the holiday affected most purchasers’ decisions on whether to buy, while 27 per cent said it affected some buyers’ decisions. A smaller six per cent of brokers thought it affected all purchasers’ decisions on whether to buy, while two per cent said none were influenced.

Similarly, 38 per cent of intermediaries said the holiday affected the timing of the purchase for most buyers, while 34 per cent said it had an impact on timing for some. Some 15 per cent of brokers said it impacted just a few, and 13 per cent said all buyers were influenced on timing by the tax break.

Customer views

The report also surveyed 72 customers of the society on their reasons for moving during the period of the holiday. The opportunity of the tax break was cited by 13 per cent, though this was lower compared to other considerations. Family reasons were a factor for 29 per cent, moving to a different area featured for 29 per cent, change in property size was given by 25 per cent, and 15 per cent were first-time buyers.

Asked specifically about the tax break, 12 per cent of customers said it was “the decisive factor”. It was “very important” for 15 per cent and “somewhat important” for 31 per cent. It was “not at all important” for 42 per cent.

Among customers, 45 believed the stamp duty break should be made permanent. Of these, 62 per cent said “it put money in the economy”, and  53 per cent said “it encourages mobility.” Some 53 per cent said it “encourages rightsizing”, and 44 per cent said believed “it simplifies the process of moving.”

One customer said: “Stamp duty as a concept for a homeowner is frustrating because you are paying the government for the privilege to work hard to buy a home, and being in a position to upgrade it.”

The report concluded that the real benefit of the stamp duty holiday had been to stimulate the housing market after lockdown and to increase spending on goods and services related to transactions.

Mark Bogard, chief executive of the Family Building Society said: “The stamp duty holiday has been a very elegantly crafted experiment, resulting in a 50 per cent increase in transactions.

“Freeing up the housing market generates economic activity. People spend money on moving and improving their new homes.

“Making the holiday permanent means the vast majority of people would not pay this bad tax. Their money could be better used supporting the economy,” he said.

Lessons From The Stamp Duty Holiday was produced by the London School of Economics on behalf of Family Building Society.

Speaking on Mortgage Solutions TV in association with Accord Mortgages, director of intermediaries Jeremy Duncombe said there were still opportunities for refinancing after the tax break. 

He said the stamp duty holiday was one of the reasons for the performance of the property market but the desire for bigger homes and relocating from the city were additional factors driving demand. 

Duncombe (pictured) said: “I’m really confident that it’s not a stamp duty-driven market, there are lots of other things contributing. I’m really confident for the rest of this year that we’ll still be in a really positive place. 

“In addition, even if the market does quieten off a little bit with purchases, there are opportunities for remortgages and product transfers – where we can potentially argue we’ve been underperforming recently.” 

Kevin Roberts, director of Legal and General Mortgage Club, said it would be a “bumper year” for product transfers, with 770,000 two and five-year fixed terms set to mature in 2021. 

Although he admitted attention given to remortgage and product transfer business dipped, as purchase activity went up, Roberts said upcoming refinancing was “why we’re optimistic of the year ahead.” 

Broker preparation 

When asked if brokers were ready and at capacity to handle the incoming refinance business, Duncombe said intermediaries tended to move with the market and deal with trends as they emerged. 

However, he suggested brokers needed to have a plan as early as possible to handle product transfers and remortgages. 

Andrew Montlake, managing director of Coreco, said good brokers were already doing this. 

Duncombe said: “It’s really important we have these customer contact strategies in place. Having a really good customer relationship management (CRM) system, using the information that’s out there, writing to your customers all the way through, not just in the last three months.   

“The important thing, if the purchase market does subdue slightly, is that you’re not scrambling round at the last minute trying to do those product transfers and remortgages. That you’ve got the actions in place ahead, so your customers are expecting it, and it’s a much easier proposition for them. The last thing a broker wants is for a customer to feel like they have to go direct to the lender.” 

Watch the video below [9:19] hosted by Paula John, editor in chief at Mortgage Solutions joined by Jeremy Duncome, director of intermediaries at Accord Mortgages, Kevin Roberts, director of Legal and General Mortgage Club and Andrew Montlake, managing director of Coreco. 

This video was filmed on 16 June, before the tapering of the stamp duty holiday. 

The 80 per cent LTV products are available both as a two and five-year fixed rate and standard and limited company borrowers are eligible.

The two-year fixed product has a rate of 3.89 per cent and comes with a rental calculation of 125 per cent at 5.5 per cent, whilst the five-year fixed has a rate of 4.15 per cent and a rental calculation of 125 per cent at payrate. They both come with a two per cent fee.

The lender has also cut a range of its two-year fixed rate and five-year fixed rate products for standard and limited company products as well as houses of multiple occupancy (HMO) and multi-unit block products.

Its two-year fixed rate product for standard and limited company landlord borrowers up to 65 per cent LTV has been reduced from 3.04 per cent to 2.99 per cent.

Its equivalent products at 70 and 75 per cent LTV has been cut by 0.1 per cent to 3.14 per cent and 3.24 per cent respectively.

The lender’s two-year fixed deal for HMO and multi-unit borrowers at 70 per cent LTV has decreased by 0.05 per cent to 3.49 per cent, whilst at 75 per cent LTV the rate has fallen by 0.15 per cent to 3.54 per cent.

All the above two-year fixed rates come with a 1.5 per cent fee and rental calculation of 125 per cent at 5.5 per cent.

The lender’s five-year fixed rate for standard and limited company borrowers at 65 per cent LTV has been cut by 0.15 per cent to 3.29 per cent and for 75 per cent LTV it has been reduced by 0.1 per cent to 3.39 per cent.

The standard products are subject to 1.5 per cent fee and the limited company products have a fee of 1.75 per cent, and the rental calculation is 125 per cent at payrate.

The lender’s five-year fixed rate products for HMO and multi-unit block borrowers at 65 per cent LTV has fallen from 3.59 per cent to 3.53 per cent, whilst for 75 per cent LTV it has decreased from 3.79 per cent to 3.73 per cent. They both come with a 1.5 per cent fee and a rental calculation of 125 per cent at payrate.

Fleet Mortgages chief commercial officer Steve Cox said the first half of the year had been busy in the landlord space, and the lender expected the trend to continue to the end of the partial stamp duty holiday and beyond.

He also noted there could also be heightened remortgaging by landlords so they can secure equity for further purchases.

“We’re catering for those landlords who can see the real opportunities property investment delivers in the UK, and these new products and the rate cuts provide them with an excellent source of finance, with competitive pricing via a highly-experienced specialist lending team,” Cox added.

When asked in a Mortgage Solutions poll: “Will sun and an excess of delayed fun with family and friends bring a summer of service difficulties?” around 73 per cent of brokers said that they were already seeing lumpy service levels.

This compares to just 18 per cent of those surveyed who thought it wouldn’t make a difference and just over 9 per cent who thought that everyone was too busy or well-managed for that to happen.

It comes after the news from Prime Minister Boris Johnson on Monday that many Covid-19 rules would be lifted on 19 July, meaning that people can socialise and travel normally after nearly 18 months of on and off restrictions.

Some brokers thought that the learning curve the sector has been on over the past year or so would help lenders and brokers navigate the summer months, whilst others took a more negative view.

Lessons learned

Chapelgate Private Finance associate director Colin Payne said he didn’t believe service levels from “freedom day” onwards would be impacted negatively.

He explained: “Lenders have learnt a great deal over the course of the last 16 months on how best to manage their processes and barring the odd exception the vast majority have had extremely good service levels.

“This is despite receiving a huge increase in volume due to pent up demand from Brexit, the sudden need for people to seek a home with outside space and the Stamp Duty holiday.”

He pointed to lenders using automated or desktop valuations, using mortgage verification schemes to verify income and reducing documents required.

He added: “So whilst the early days of the pandemic created problems for brokers and lenders alike, these have in the main been successfully overcome, which can only be good news for service levels going forward.”

Chess Mortgages adviser and director Bob Singh said that service levels over the summer would be a “game of two halves” for brokers; those with cases at £250,000 and below and those with cases priced higher than £250,000.

He said that brokers who deal with larger cases would experience a bit of a slowdown but not experience too much disruption as lender capacity is expected to increase.

Singh added that there could be service disruption due to further stamp duty deadlines but hoped that lessons had been learnt from the last month.

He said: “Freedom day will be a green light for many to go out and have a good time. Home buying may not be a big priority for some. The expected slowdown in the marketplace coupled with the spectre of rising inflation and possible mass unemployment following the end of the furlough scheme are factors which could slow down the relentless rise in house price inflation fuelled by the stamp duty benefits announced last year.”

‘Shabby’ service

Jane King, mortgage and equity release adviser, Ash Ridge Private Finance, said that the summer would not make much difference to service levels.

She said that there has been some “very shabby service standards” over the past year from some lenders as underwriters, administrators and tech support have been working remotely.

She also noted that some business development managers had been late in returning calls, which had delayed cases.

King said: “We have had to manage client expectations and make sure that this does not reflect badly on us as many of us have been working long hours and trying our best to get cases through. The stamp duty holiday stampede has not helped.”

She added: “As a result I think I am so used to it that it won’t make much difference. I have been advising clients for the past year that if they want fast turnaround times then we need to maybe select a lender on this priority rather than rate and this may well continue to be the case.”

Although I expect that the surge in buyer demand experienced over the past year has in part been driven by a fundamental shift in lifestyle changes and the desire for something ‘different’, there is no denying that the stamp duty holiday has been a major contributory factor.

Looking at Paragon’s book, we see that over 50 per cent of the business we’re still taking is for purchases.    

There’s little doubt the holiday particularly resonated with buy-to-let investors and I’m pleased the Treasury saw sense and pushed back the cliff-edge of the initial March deadline and introduced the September taper. 

The opportunity to acquire new property with cheaper buying costs has been compelling, particularly during a period of intense tenant demand which shows no sign of letting up. The opportunity to secure a maximum £15,000 tax saving cannot be ignored when analysing a property investment.   

Industry figures show that 29,000 buy-to-let loans were written for house purchase during the first quarter of 2021.  

Landlords have also taken the opportunity to incorporate their portfolio structures into limited companies and this will show as purchase business.

This means that it is still unclear as to what the final total will be, but we can be confident that the initiative has acted as an incentive for investment when we compare the number we have now to the figure from the same period last year which was just a shade over 18,000.  

The first quarter of 2021 was the highest since the corresponding quarter of 2016, after which the three per cent stamp duty surcharge was applied to buy-to-let purchases.  

Gains in high value areas 

What’s telling is that the regions with the highest average house prices recorded the greatest spikes in buy-to-let house purchase.  

London, for example, recorded a 76 per cent increase in buy-to-let mortgages for house purchase during the first three months of the year compared to the same period last year. Similarly, the South East was up 66 per cent and the South West up 62 per cent.  

Northern regions, where the benefit of the stamp duty holiday is less pronounced due to lower average house prices, still experienced impressive growth, but it was muted compared to southern locations. The North West was up 30 per cent in terms of the volume of buy-to-let mortgages for house purchase, whilst Yorkshire and Humber recorded a 34 per cent increase.  

Of course, there could be other contributing factors why the South has seen a sharper increase in buy-to-let house purchase.  

UK Finance recently noted in its Household Finance Review that Londoners have been selling up and using their strong equity positions to buy property in locations further afield then the suburbs or periphery outright.  

Shift to renting 

However, not all want to move to a new area and buy right away. Renting is the ideal option for many as they test a location before buying and landlords have been responding by acquiring new property in southern areas outside of the traditional London commuter belt.  

Our in-house surveyors report strong demand for property in the likes of Bristol, picturesque southern counties and coastal locations.  

One acquaintance of mine is doing exactly that currently and is searching for family rental accommodation in Buckinghamshire.  

The issue she faces is competition for that type of property, which is fierce, and she is facing the prospect of sealed bids from nine to 10 competing families for the homes she is interested in. 

Landlords are responding and adding family homes to their portfolios. Purchases of buy-to-let detached homes was 66 per cent higher year-on-year in the first quarter, whilst semi-detached homes were 56 per cent up.     

There is plenty of life left in this shift in housing demand and whilst the stamp duty holiday helped light the touch paper for property sales, there are longer-term factors at play here that are creating sustained demand for housing more broadly.  

That will benefit landlords and, of course, Rishi’s tax take. 

Product changes also dominated, including Santander’s update to its proof of deposit criteria and TSB’s removal of higher fee remortgages. The Bank of Ireland’s decision to cull its mortgage sales team was also among most read this week.

Santander updates proof of deposit requirements

Majority of brokers want SDLT extension but many argue for ‘return to normal’

Stamp duty savings wiped out by inflated house prices – MIAC

TSB launches sub-one per cent deal and pulls high-fee remortgages

BOI mortgage sales staff to be cut from 17 to 12 through consultation

Santander adds £1,000 cashback to FTB deals; Leeds BS reduces rates on ERC-free range

EWS1 lender requests still a ‘grey area’ and ‘mess’ despite updated RICS guidance – analysis

Metro Bank hints at further expansion after ‘more product changes than most’

‘Brokers who have not relied on stamp duty holiday will do best going forward’ – Marketwatch

UK economy shrank more than first thought during third lockdown

A study from MIAC Property Analytics compared sold house prices in June 2020, the month before the introduction of the stamp duty holiday, to April this year. 

Buyers in Westminster, London fared the worst during the stamp duty holiday as property prices rose by £136,889 to £1,759,530 from June last year to April this year.  

While the break would have exempted them on paying a tax for the first £500,000 of the purchase price, they would have had to pay a levy of £109,894 this year compared to £108,467 last year. 

On balance, Westminster buyers were £138,316 worse off when price changes were considered. 

House prices in Waltham Forest would have fallen under the threshold last year as properties had  an average price of £498,341. However, a £57,174 increase by April meant the maximum saving that could be made stood at £12,141 on an average property value of £555,515. 

Factoring in price rises, transactions were in fact £45,033 more expensive for the Waltham Forest buyer. 

Rutland in the East Midlands saw house prices surge to £447,235 over the analysed period, an increased of £49,263.  

Although this remained below the new threshold, the £9,899 that would have been paid in stamp duty was outstripped by the change in property price, resulting in a £39,364 loss. 

Buyers in Hammersmith and Fulham made the greatest saving, with a stamp duty reduction of £14,680 allowing buyers to save £8,272 despite the average price rising from £784,460 in June 2020 to £790,867 in April 2021. 

MIAC Analytics’ managing director Darrel Welch, said: “The stamp duty holiday was an initiative designed to reboot a property market that had effectively stagnated as the pandemic and lockdown measures delayed completions and made house viewings virtually impossible.  

“One of the unintended consequences of the stamp duty holiday has been a gold rush to complete before the respective deadlines, with the unprecedented demand pushing up prices in return.”   

He added: “What this data shows is that a significant amount of the stamp duty saving made over the last year has simply been added onto the cost of the sale, in some cases adding tens of thousands of pounds on to a mortgage.  

“This data provides a snapshot of the holiday’s impact in real time, but it will be at least six to 12 months down the line until we can understand the true impact. If house prices snap back to pre-pandemic trends, then thousands of people could be at risk of oversized mortgages and negative equity.” 

Data from Moneysupermarket suggested buyers in Liverpool benefitted the most from Chancellor Rishi Sunak’s decision to raise the stamp duty threshold to £500,000 until 30 June, making an average saving of £8,167.

Londoners and Edinburgh buyers were next in line to bag the biggest savings with £7,410 and £7,100 wiped off their stamp duty bills respectively. Buyers in Belfast and Leicester saved the least.

Around 1.3m buyers have taken advantage of the stamp duty holiday and only a small minority of house hunters are expected to abandon plans if they miss the upcoming deadline, according to Rightmove.

From 1 July, the nil-rate threshold drops down from £500,000 to £250,000 and first-time buyer relief is reinstated. After 30 September the threshold drops to its pre-holiday level of £125,000.

Despite the rush to complete purchases before 30 June, around of third of buyers say they are expecting to take advantage of the deadline ending 30 September.

The chance to save up to £15,000 in stamp duty also sparked a selling frenzy as 57 per cent of homeowners who put their homes on the market did so because of the temporary tax relief.

Since the introduction of the stamp duty holiday in July 2020, more than 170,000 extra transactions have taken place than would be expected in a normal 12-month period, analysis by Search Acumen found.

And as demand from homemovers outweighed the supply of new homes, average asking prices have been driven up by £16,000 to £320,265 over the last 12 months.

Jo Thornhill, mortgages expert at Moneysupermarket, said: “The stamp duty holiday has been hugely popular with buyers and it’s clear from our research why that’s the case: average savings of £5k can make a huge difference when you’re buying a property, giving you the flexibility to spend that money on other cost items like solicitors fees, general moving bills or even new furnishings.”