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?