15
Feb
Is the First Time Buyer back?
Do first-time buyers really feel stamp duty bound? The CML and
RICS suggest the increase in the number of first-time mortgages is
due to buyers trying to make a saving before the stamp duty holiday
ends. Do you agree?
Knock-down rate: first-time buyers can currently make savings of
between £1,250 and £2,500 because of the stamp duty
holiday.
Is the first-time buyer back? Figures from the Council of Mortgage
Lenders (CML) show the number of mortgages advanced to these
borrowers rose by 7% in December, while the communities and local
government department says the average price paid by first-time
buyers was up by 1.6% year-on-year in the same month (PDF). These
were against falls in the rest of the market.
Both the CML and the Royal Institution of Chartered Surveyors have
suggested that the imminent end of the stamp duty holiday on
properties costing between £125,000 and £250,000 is
behind the flurry of activity. Until 24 March, first-timers will
save the 1% tax usually charged on properties in this bracket. This
means a saving of between £1,250 and £2,500.
The CML says that in November the average first-time buyer property
cost £130,000, with buyers putting down a deposit of
£26,000. On this property the stamp duty saving would be
£1,300. While it would certainly be better to have that money
than spend it, would first-time buyers really be inclined to rush
through the biggest purchase of their life to save that much
cash?
There are other factors which could be driving the increase. In
recent months lenders have started to reintroduce 95% loans, and
while the CML figures show borrowers are still stumping up large
deposits, it is possible the presence of such deals is making
people think they have more chance of getting a loan. Those who
have been sitting tight and saving may also have been persuaded to
take the leap by rising rents in many parts of the country.
We should find out soon. The time left for buyers who want to beat
the stamp duty deadline is running out – the legal process of
buying a property typically takes a couple of months so you need to
make an offer pretty quickly if you want to complete within five
weeks (and make sure everyone involved is aware you are against the
clock). If demand really is being driven by the deadline it should
drop off in the next couple of weeks.
When the CML and DCLG publish their figures for February and March
we should be able to see if the first-time buyer is back for good.
In the meantime, if you are a first-timer or someone selling a
property into that market, what is your view? Is the looming stamp
duty deadline having an impact, or are other factors more
important?