Until 30 September, the relief will only apply to properties of £250,000 and under, before returning to the standard threshold of £125,000 on 1 October, alongside the previous duty exemptions for first-time buyers.
With average property prices at an all-time high and now surpassing the new threshold, activity in the market is expected to tail off as savings become less likely.
So this week, Mortgage Solutions is asking: Will the housing market be noticeably affected by the tapering of the stamp duty holiday?
The stamp duty holiday was introduced and then extended to boost demand following the almost total shutdown of the housing market and this policy seems to have been a clear success.
There is some concern that a small number of purchases might fall through, and overall demand and transaction levels will drop.
Certainly, some buyers who might have benefited from the tax holiday might re-think their options, but any idea that we will see a huge fall in activity ignores the fact that the market simply hasn’t been operating as normal for the past year and a half.
The longer-term economic and societal impact of the pandemic, as well as how the industry continues to respond, will likely play a far bigger role in influencing the future of the housing market.
As lockdown restrictions continue to ease, more pent-up demand will be released as buyers and sellers who have sat tight come to market. Additionally, the future of where and how many of us will work post-pandemic is becoming clearer and more definite.
This could mean the ‘race for space’ accelerates. There are also serious challenges looming over the future of the market that go far beyond the end of the tax holiday.
The end of furlough later this year and the withdrawal of government lending from businesses could have serious ramifications for the finances of potential buyers. As the economic impact of the pandemic becomes clearer, issues of affordability and vulnerability look set to come to the fore.
The property industry needs to look beyond the end of the stamp duty holiday and ensure that it is prepared to meet these challenges, by investing in the right tech and people, refining capabilities and examining procedures.
The mortgage market will certainly be impacted by the tapering of the stamp duty holiday. However, the extent to which it changes the market is still to be seen.
We know that demand for property is currently being driven by a real range of factors and that means people will still be keen to move, even after the tapering takes effect next month. Many still wish to upsize and relocate and there is also significant demand from international buyers.
Last month, our SmartrCriteria data showed that advisers searched for mortgages suitable for buyers with visas more than almost any other criteria point.
It’s also important to remember that we have not seen any significant changes to housing supply or how our housing stock is utilised since the stamp duty holiday began.
That means competition for homes remains high and at a time where housing availability remains unchanged. We must remain positive that the UK’s levelling up agenda will help to change this, but for now, unless there is a big shift in housing supply or usage, stable price growth looks set to remain.
Many have been quick to predict cliff edge disruption when the stamp duty holiday draws to an end, but we’re more likely to see a more gradual return to normal market conditions.
For now, while mortgage rates remain extremely competitive, it continues to be a great time for people to borrow.
It’s unlikely that the 1 July will bring as big a ‘cliff edge’ as many in the market previously feared, thanks to the taper.
However, there will undoubtedly be many disappointed borrowers who are unable to complete ahead of the deadline and whose tax bill will be higher than planned – the cliff edge was simply moved and a different set of purchases are now affected.
It’s worth noting though that what we’re seeing is a gradual return to a normal level of stamp duty, so any discount is an added bonus.
For intermediaries, it’s vital that they continue to plan ahead to help their customers both in the short-term and after the tax break ends – the Covid-19 pandemic has changed working patterns for many, and their housing requirements have changed to match, with many now able to look further afield than before.
Brokers who have maximised alternative streams of business, stayed in touch with existing clients, and who haven’t relied on stamp duty holiday-fueled activity to survive will be best placed to carry on their success through the rest of the year and beyond.
The remortgage and product transfer market in particular could offer a strong source of business for many this year, due to a high volume of product maturities on the horizon.
Being there to advise clients and help them get the best deal will mean that a broker’s services remain in demand. And we shouldn’t forget that house purchases will continue, even if at a lower level. As ever, advice will be crucial, especially for first-time buyers and the self-employed, and it’s there that brokers can really make a difference to borrowers.