Mortgage completion warning issued as SDLT deadline looms – how to lock in deals past July
Martin Lewis gives advice on paying mortgage with savings
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Rishi Sunak altered stamp duty land tax (SDLT) rules in 2020 as the Chancellor announced no stamp duty will be charged on residential properties valued up to £500,000. From July 1, this threshold will reduce to £250,000.
In light of this deadline, many property and mortgage experts warned lenders, conveyancers and solicitors would be swamped with applications from savers looking to take advantage of the new rules.
This may yet prove to be a continuing issue as today, the Law Society issued a warning as conveyancing solicitors face “pressure” in light of the tight deadlines.
Stephanie Boyce, a president at the Law Society of England and Wales, commented on this.
She said: “We understand the terrific pressure that conveyancers are under ahead of the 30 June deadline, pressure that many solicitors have now been under for some time as they continue to work under the most challenging circumstances.
“Stressed and under-pressure solicitors have been working late into the night and over weekends, with little or no work-life balance, to ensure their clients’ transactions are able to complete according to their wishes.
“It is key at this stage for conveyancing solicitors to take steps to manage their clients’ expectations about completing in time to take advantage of the stamp duty holiday.
“Many factors limiting the speed of a move – delays in the issuing of search results, delays in mortgage offers being issued, problems in the chain and with dependent transactions – are usually outside the control of the conveyancer.
“They cannot guarantee transactions will complete before the end of June.”
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The impact of this SDLT rush has impacted both mortgage deals and property prices as all stakeholders involved attempt to adapt.
Today, Halifax also released its latest House Price Index report which showed house prices have risen to record highs.
The average price for a house in the UK is now £261,743, an annual increase of 9.5 percent.
James Forrester, the Managing Director of Barrows and Forrester, commented on these figures and while he acknowledged completing before the deadline may be difficult, the market itself may still benefit beyond this.
He said: “Despite the prospect of a stamp duty saving now unlikely for many homebuyers the market continues to move forward at pace, driven by an appetite for homeownership not seen since before the financial crisis.
“While the expiry of the stamp duty holiday is expected to have some impact, it’s unlikely to derail a market that continues to see buyers enter in their droves, buoyed by low interest rates and 95 percent mortgage availability.”
This optimism appears to be supported by newly released data from Moneyfacts, which highlighted there has been a spike in product choice as providers rise to the challenge to cater to borrower demand, a confidence, it argues, is expected to prevail in the months to come.
Moneyfacts latest Mortgage Trends Treasury Report showed:
- At 4,243, product choice for mortgage borrowers is at the highest level we have recorded since the onset of the pandemic, after rising for the eighth consecutive month (March 2020, 5,222). Borrowers with smaller deposits may be pleased to see that their options have further improved as the tier to see the largest uplift was 95 percent loan-to-value (LTV), where there has been a rise of 80.
- Rate competition has stepped up in some LTV sectors; some providers have launched eye-catching sub-1 percent deals in the lower LTV brackets and competitive repricing has been evident in the higher LTV tiers. However, growth in the number of higher LTV, higher rate deals and rate rises in the mid-LTV tiers fuelled increases to the overall two and five-year fixed rate averages once again, now 2.59 percent and 2.82 percent respectively. While these averages are above those recorded this time last year when availability was low, when compared to June 2019, those hoping to secure the longer-term stability of a five-year fixed rate may wish to note that the overall average is 0.03 percent lower now.
- With changes to products and criteria coming in thick and fast, the average shelf life of a mortgage deal dropped, giving prospective borrowers just 28 days to secure their chosen deal, indicating that speed and preparation may be key in ensuring they are able to secure their preferred option.
Eleanor Williams, a Finance Expert at Moneyfacts, broke down these figures further and provided guidance on how savers can take advantage: “Homeowners’ aspirations to acquire larger living space and to make the stamp duty holiday deadline has pushed up UK house prices and while the demand for a dwindling supply of property continues to increase, there has been a notable surge in mortgage borrowing.
“Lenders are reacting by improving product choice, with 316 more products now on offer compared to last month, seeing overall mortgage availability top 4,000 products for the first time since the pandemic’s impact began over a year ago. Recently published UK Finance data recorded the highest number of house purchase advances since August 2007, and also showed first-time buyer advances were the highest on its records at 42,330.
“While improvements in availability were recorded across the majority of the LTV tiers, it was at 95 percent LTV that nearly a quarter of the new deals were launched. Over the course of the past month, 33 new two-year fixed rate products were launched, seeing the average fixed rate drop by a substantial 0.14 percent to 3.88 percent – the lowest this has been since it fell to 3.28 percent in June 2020, when availability had shrunk to just 31 deals. Those seeking a five-year fixed rate in this tier have 27 further product options launched this month, and also saw a notable drop in the average rate, falling by 0.10 percent to sit at 4.07 percent. While these remain some 0.63 percent and 0.40 percent above where these rates were in June 2019, it seems that the trajectory is moving in the right direction. The resurgence of high LTV products and the fact that their average rates are beginning to fall is particularly good news for first-time buyers, especially considering that Nationwide Building Society’s recent House Price Index Report found that house prices have risen nearly £24,000 over the past year, meaning that building that 5 percent deposit is even harder now.
“As well as changes in the top LTV tiers, rate competition has become evident at the opposite extreme of the LTV spectrum, with a number of lenders launching eye-catching sub-1 percent mortgage deals in the lowest LTV brackets. These record-low rates are available to low-risk borrowers with high levels of equity, but as to whether this competition will extend to higher-LTV deals remains to be seen as we navigate the full economic impact of the last year. Those looking to secure a new mortgage deal may find it invaluable to seek advice, not just to establish what the best product for their circumstances would be, but also to ensure they get guidance on affordability and eligibility criteria while these remain fluid.”
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