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This week’s headlines have centered on mortgage chaos and interest rates – but there’s one good news to consider.
Thousands of homebuyers who have completed their purchases in the past seven days have already benefited from the stamp duty cut announced by Chancellor Kwasi Kwarteng in his controversial mini-Budget, and real estate website Zoopla says 43 percent of all homes on the market are now no stamp carries duty at all.
The government says the austerity measures will help boost the faltering economy and there are some signs it’s working.
Savings: Thousands of home buyers who completed their purchases in the past seven days have already taken advantage of the stamp duty discount
Rightmove says the number of visits to its home sales ads jumped 10 percent just after the mini-budget, and the number of sales agreed this Tuesday was the highest on a single day since early August.
The website says this week’s fall-throughs — the number of sales collapsing — are completely in line with long-term averages.
So with all eyes on the housing market, here’s what’s changing and what’s not…
What are the new stamp duties?
There is no tax on the first £250,000 of the property’s price – an increase of £125,000. Homes with a higher price are unchanged, so buyers pay 5 percent tax on the part from £250,001 to £925,000, then 10 percent from £925,001 to £1.5 million. You pay 12 percent on the price above £1.5 million.
Are they the same for starters?
They pay no stamp duty on properties up to £425,000 (previously £300,000) and 5 percent on purchases up to £625,000 (previously £500,000).
Will the change be reversed after this week’s furor?
Highly unlikely. The change came when the chancellor spoke on September 23, so thousands have already benefited.
And Liz Truss doubled the rebate ahead of this weekend’s Tory party conference, telling the BBC she is “very clear that the government has done the right thing” by taking action “to tackle inflation, tackle the economic slowdown.” suits and with the high energy bill’.
What are we paying to move to a new £350,000 house?
Up to £250,000 you now pay no stamp duty – a saving of £2,500 thanks to the chancellor’s new measure.
On the part of £250,001 and £350,000 you pay 5 percent, which is £5,000. So that’s £5,000 stamp duty on the whole price instead of £7,500 — a saving of £2,500.
Will the cut drive prices up?
Again, highly unlikely. First, £2,500 is a handy amount, but not enough to convince people who aren’t already planning to buy.
Relief: Up to £250,000 now you don’t pay stamp duty – £2,500 savings thanks to the chancellor’s new measure
Second, it’s a permanent cut, not the temporary one we saw during the pandemic, so people don’t have to rush to buy immediately.
And third, there are many more homes for sale today than earlier this year, so demand is not far ahead of supply and price increases are slowing down.
Can sellers raise their asking prices?
It is possible – and some will – but this is unwise. With fears that interest rates could hit 6 percent next year, buyers are now very cost sensitive. An unreasonable asking price will leave your house on the shelf for months.
Will the cut be wiped out by higher interest rates?
Forty percent of mortgage deals have been temporarily halted, most return with higher costs.
But remember, government figures show that 36 percent of homes are owned without a mortgage.
Of the rest, an estimated three-quarters have fixed interest rates, so costs won’t rise immediately.
For buyers from these groups, the stamp duty saving is real and is not lost with higher mortgage repayments.
I plan to downsize – is there any help for me?
Afraid not. Many housing experts want stamp duties to be phased out to encourage older owners to move into smaller homes, freeing up larger homes for families.
But other than the chancellor’s general change in the threshold at which duty begins, nothing is tailor-made for the retired or elderly homeowner.
Does Kwasi encourage landlords and holiday home buyers?
With the cost of living, these groups are not seen as a priority. So while they’re saving up to £2,500 like everyone else, the 3 percent stamp duty surcharge on buy-to-lets and weekend cottages introduced in 2016 remains in effect.
And this week, Labor hinted that it may face more taxes on landlords if it comes to power.
What’s happening in Wales and Scotland?
Wales’ stamp duty, called the Land Transaction Tax, will change on October 10, after which no tax will be levied on houses under £225,000 – up from £180,000 – with small increases for houses over £345,000.
There is no change to Scotland’s land and building transaction tax, but a budget north of the border on October 24 could change all that.