How will the stamp duty cuts impact the housing market?
The biggest thing affecting the outlook for the housing market right now is rising mortgage rates.
And while the government announced plans to cut stamp duty last Friday, the move may not be enough to combat the rising cost of mortgages for many new buyers.
Rising mortgage rates set to reduce buying power by 28%
Our analysis shows that the benefits of the stamp duty changes will be felt by buyers in markets across the midlands and northern regions of England where homes are less than £250,000.
Stamp duty calculator
How much stamp duty will you need to pay? Let our calculator do the maths. Here's how stamp duty works.
For first-time buyers there is more of a boost in southern England, where many more homes are now going to be stamp duty free or cost less in stamp duty than before.
First-time buyers now won’t need to pay stamp duty on the first £425,000 of a property they buy (as long as it’s under £625,000).
The tax previously kicked in at £300,000 for any property under £500,000 for first-time buyers.
Meanwhile all home movers won’t pay the tax on the first £250,000 of any property they buy. The relief previously ended at £125,000.
Find out what that means for you with our stamp duty calculator
But are the moves enough to allay buyers’ fears around rising mortgage rates?
“Stamp duty changes are welcome and will boost some sectors of the market,” says Zoopla's Research Director, Richard Donnell.
“But overall, they are unlikely to offset the impact of higher mortgage rates on housing activity,”
In England, stamp duty has the greatest impact on buyers in the south of the country.
In fact, more than two-thirds of stamp duty in England is paid by buyers in London and the South East.
Pandemic house price boom adds to affordability troubles
Friday’s mini budget freed all homes in England and Northern Ireland under £250,000 from the tax. That’s 43% of all homes in total.
And it will provide a boost to regional markets. In many areas the number of homes that are now exempt from the tax will more than double, delivering savings of up to £2,500 per sale.
However, the benefits are unlikely to be felt in southern England, unless you’re a first-time buyer, as prices are already much higher than this threshold in many areas.
If you are a first-time buyer, and one in every three purchases is made by first-time buyers, you will see savings of up to £10,000 per purchase.
And these savings can now be enjoyed on 65% of homes in London, rising to over 80% across Southern England.
But whether the savings are enough to offset rising mortgage costs for new home purchases remains to be seen.
“While any changes that reduce the costs of buying a home are welcome, the changes in the Budget do little to reduce the 90% of stamp duty paid on homes over £250,000,” says Donnell.
“This buyers’ tax remains a big cost for existing homeowners buying a property in south eastern England, particularly in the £500,000 to £925,000 price range, which accounts for a sizable proportion of sales.
“The budget was a missed opportunity to remove barriers to sale at this end of the market where higher mortgage rates will also have a greater impact on demand.”
Are we shifting to a buyers' market as more homes are reduced in price?