After the Autumn Budget was announced, the country is looking at a massive economic change in the forthcoming year due to changes in a number of sectors. And for first-time buyers, however, it isn’t good news.
With nearly a quarter of first-time buyers having to pay stamp duty this year alone, in the coming months this figure is likely to rise. Starting from April 1st next year, the stamp duty threshold will drop from £425,000 to £300,000.
With many potential homeowners hoping for the higher threshold that was introduced as temporary relief to stay, Jonathan Bone, Head of Mortgages at Better.co.uk has provided insight into what this means for the future of first-time buyers and the housing market as a whole.
“The current stamp duty threshold for first-time buyers in England and Northern Ireland is £425,000, with a full exemption on the first £300,000 and a reduced rate between £300,000 and £425,000.
“However, this year there has been a massive increase in the number of people who are paying stamp-duty tax, with nearly a quarter having to do so. But why?
“One of the biggest driving forces behind increasing numbers is due to property prices across the country.
“Property prices in the UK have climbed sharply, with the median mortgage value over the last year for first-time buyers standing at £217,500 and a typical deposit amounting to £40,000, according to data by Better.co.uk. This high deposit, combined with increased property values, underscores the rising affordability challenges for first-time buyers despite current exemptions on stamp duty in certain cases.
“In cities where property prices are significantly above the national median, such as London and Cambridge
(*averaging £505,925 and £365,234, respectively), the reduction in the stamp duty threshold is expected to have a notable impact on buyers. However, in more affordable areas like Hull, where the average property price is just *£123,620, the reduction may have minimal effect
“Inflation has also meant buyers may have a reduced ability to save or buy a property outright, leading to larger mortgages needed to afford pricier properties.
“The previous threshold was introduced in September 2022 as a temporary relief for first-time buyers to get them on the property ladder. However, much to the disappointment of first-time buyers, Labour has decided to continue with the previous plans put in place by the Conservative party.
“Chancellor Rachel Reeves left any mention of stamp duty out of the Autumn Budget, confirming that changes are on the horizon.
“But it’s not only first-time buyers that will be impacted, homeowners looking to move will also see a reduction. The threshold will fall from £250,000 to £125,000. This shift means that many buyers, particularly in areas with high property prices, will be facing stamp duty costs much sooner than expected.”
