The property market faces fresh uncertainty today as the Government’s latest Stamp Duty threshold changes take effect.
The tax-free threshold for first-time buyers has now dropped from £425,000 to £300,000, a move that industry experts warn could further dampen demand and place additional financial strain on aspiring homeowners.
Rachel Geddes, strategic lender relationship director at Mortgage Advice Bureau, highlighted the widespread impact of the change.
She said: “With 41% of our prospective buyers stating that the latest Stamp Duty changes may prevent them from purchasing a property in the next 12 months, it’s clear we need to pursue other avenues to get more aspiring homeowners into the market.”
Concerns over affordability and accessibility are mounting, with Geddes warning that the removal of tax relief could lead to a drop in house prices as demand falls.
She called on lenders to adjust their approach, noting: “People’s borrowing abilities, goals, and lifestyles have evolved, yet our lending rules remain static.
“From adjusting loan-to-income (LTI) caps to enhance borrowing power, to providing additional 95%+ loan-to-value (LTV) lending, there are so many ways we can get more first-time buyers onto the property ladder.”
Toni Smith, distribution director at Sesame Network, noted that the industry is likely to see a predictable lull in activity.
She said: “As we’ve seen when previous stamp duty holidays or concessions have ended, there is typically a surge of activity as buyers looked to beat the deadline, followed by a period of lower demand.”
Smith added that while Q1 saw an uptick in transactions, Q2 will likely experience a slowdown before the market strengthens again in 2025.
Smith further explained: “The rush in Q1 means that Q2 will be noticeably slower for everyone.
“However, 2025 will be a stronger market than 2024 all around, so we expect the second half of the year to make up for any slowdown that occurs in spring.”
She also pointed out that while missing the deadline is frustrating, buyers still have options.
Smith noted: “Try to renegotiate the sales price with the seller. If they are responsible for holding things up, they may agree to lower their asking price to cover the extra tax.
“If not, buyers could divert some of their deposit money to pay the additional tax, though this might mean slipping into a higher LTV bracket, which would likely incur a higher rate.
“Alternatively, buyers could always check if a close family member will gift or loan them the money they need to pay the extra Stamp Duty.”
For those now facing increased costs, industry figures are offering advice on navigating the new landscape.
David Roberts, head of property at HCB Solicitors Bristol, emphasised the need for buyers to explore alternative solutions.
He said: “For those concerned about affordability, there are still ways to make home ownership more accessible.
“First-time buyers should explore government-backed schemes such as the First Homes scheme, which provides a 30% to 50% discount on eligible properties, or the Lifetime ISA, which offers a 25% bonus on savings used towards a property purchase.”
Smith also suggested renegotiating sales prices with sellers or seeking financial assistance from family members to cover the extra tax burden.
For those unable to stretch their budgets, shared ownership or cheaper properties may offer a viable alternative.
With mortgage affordability under increasing scrutiny, Geddes pointed to recent comments from the Financial Conduct Authority (FCA) that criticised lenders for being overly cautious with first-time buyers.
She said: “There’s already some level of flexibility with stress testing that isn’t being taken advantage of, and this was rightly called out.
“All eyes are now firmly on the lender community to take this on board, embracing innovation and a forward-thinking approach,” she added:
Aaron Milburn, UK managing director at Pepper Advantage, echoed these concerns, pointing to the latest Bank of England data showing a dip in mortgage approvals.
He said: “Higher costs mean greater hesitancy when buying a new home.
“These concerns are reflected in Pepper Advantage’s UK Credit Intelligence report, which suggests inflationary pressures remain a key concern for many households, with mortgage arrears growth continuing to increase at rates not seen since Q1 2024.”
Despite the concerns, some experts believe that the extra cost may eventually be absorbed within house prices.
Toby Leek, President of NAEA Propertymark, said: “Some will be disappointed that they were unable to complete quickly enough to avoid paying extra Stamp Duty, leaving many with an additional £2,500 burden.
“However, the extra cost may be absorbed within the price of properties, remaining within affordable limits for many buyers, especially as mortgage products improve.”
Leek also urged the Government to reassess Stamp Duty value bands to reflect the reality of rising house prices.
He added: “For some, home ownership aspirations are unrealistic, with the average deposit now around £50,000.
“The UK Government needs to urgently review Stamp Duty bands and ensure any current or future measures to help first-time buyers, including saving ISAs, are fit for purpose.”
As the property market adjusts to these changes, buyers are encouraged to seek expert advice, assess all available options, and stay informed on potential policy adjustments that could influence their path to homeownership.
