Time to manage borrower expectations as stamp duty deadline approaches
As lenders and brokers, we are only too aware of the looming stamp duty holiday deadline. Since September 2022, buyers of homes priced up to £250,000 have been exempt from paying the duty. This will revert to previous levels from April, when stamp duty will be payable on homes priced above £125,000. The threshold has also been raised for first-time buyers since 2022, with no stamp duty payable on homes priced up to £425,000. That exemption also disappears on 1 April.
With the average property transaction currently taking an average of 5 months (151 days) to complete, buyers who did not kick off their mortgage application before the end of October face the potential of higher stamp duty costs.
Following October’s Budget, which confirmed there would be no extension of these rules, there was an uptick in first-time buyer demand, exacerbating the inevitable bottleneck as April approaches.
With staff at the Land Registry currently threatening strike action from 21 January over the requirement to return to the office three days a week, there are also fears that delays to transfer of title could also be exacerbated.
Many conveyancing firms are working through their pipelines and prioritising cases according to mortgage expiry date, to avoid a double whammy where a buyer risks having to sort out a new mortgage deal, and also missing the stamp duty deadline.
Many lenders are also checking their pipelines and getting BDMs involved to keep cases flowing through as fast as they can.
Brokers who have not already done so are also being urged to contact those clients at risk of missing the reduced stamp duty cut-off, in order to prepare them for the worst-case scenario.
Robert Sinclair, chief executive at the Association of Mortgage Intermediaries, says: “The end of any homebuyer incentive inevitably distorts the market for a period and results in disappointment for those who miss the cut-off point. Managing mortgage borrowers’ expectations is of primary importance at such times as these. Brokers and lenders are working hard to complete on as many affected cases as possible before 1 April, but there will no doubt be many which don’t beat the deadline. While no-one wants to be the bearer of bad news, it is better to have a well-informed client prepared for potential higher buying costs than one who is both disappointed and surprised.”
Kate Davies, executive director of the Intermediary Mortgage Lenders Association, added: “Lenders are just as keen as brokers to ensure as many customers as possible can complete on their property transactions ahead of 1 April, but congestion at the conveyancing stage is a real issue, and some borrowers will bear the brunt of higher stamp duty as a result. Industrial action at the Land Registry will not help when it comes to transfer of title post-completion, particularly with those less routine cases which cannot be dealt with via an automated process. It is more important than ever that we keep the lines of communication open between lender, broker and borrower in the weeks ahead.”
