Buyers save an average of £1,300 since stamp duty changes

21st January 2015

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Home buyers are saving an average of £1,300 since the reforms to stamp duty brought in on December 4, a study reveals.

Buyers in the South East and London are making the greatest savings from the stamp duty changes, Mortgage Advice Bureau’s (MAB) found.

MAB’s data for December revealed that the average deposit reached a 14-month high of 30.7%.

Tighter affordability criteria have fuelled the rise in deposit levels by keeping borrowing in check, MAB concluded.

The last time that deposits were this high, October 2013, was the point at which the Help to Buy mortgage guarantee scheme launched, encouraging more lending to people – typically first time buyers – with deposits of just 5%.

The average deposit for purchase mortgage applications across the market subsequently dipped as low as 28.2% in March 2014 as more lenders joined the scheme and others launched competing high loan to value (LTV) deals.

Since then, stricter loan criteria under the Mortgage Market Review (MMR) rules have reversed the trend.

MAB also revealed that mortgage applications increased by 26% year-on-year in December.

The stamp duty changes have handed some advantage back to buyers by providing them with more available funds. December’s average purchase price of £231,487 would only qualify for a £185.13 stamp duty reduction under the new system. But anyone buying a house worth £250,001 paid almost £5,000 (£4,999.98) less since December 4 compared with the old ‘slab’ system.

Average deposits in December were £2,249 (3%) higher than in November at £71,078. This monthly average and rate of increase was the highest seen since May 2014: the first full month where the market operated under the MMR rules.

Brian Murphy, head of lending at Mortgage Advice Bureau, said: “December’s stamp duty announcement was an early Christmas present for many aspiring buyers. Having extra funds to put towards a deposit can not only help to limit borrowing commitments and give people more bargaining power. It can also allow access to better mortgage deals at lower LTVs, either at the point of purchase or when it comes to remortgaging at a later date.

“We are yet to see the extent that stamp duty savings are mirrored in higher asking prices, but after a period where credit conditions were squeezed by the new mortgage rules, this fairer tax regime has certainly fuelled buyer optimism about their purchase prospects for 2015.”

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