3rd March 2014
Almost a quarter of first-time buyers are not considering the cost of stamp duty before making an offer on their potential home, according to new research by TSB.
In fact, one in seven, or 14% of people buying their second or third homes do not consider stamp duty either.
The study also shows that people’s level of consideration of stamp duty varies quite significantly across Britain. Residents in the East of England, at 50%, the south west, 49%, and south east, at 48%, are stamp duty savviest, setting aside a specific amount to cover stamp duty.
In contrast, one in four of those living in the north west, at 26%, and Wales, at 25% are not considering the cost of stamp duty before making an offer on their potential home.
However, many first-time buyers, at some 41%, and established homeowners, at 45% are well-prepared having calculated the exact amount to set aside for stamp duty.
Stamp duty now equivalent to almost a tenth of the average deposit
The research also found the average stamp duty outlay exceeds £5,000, the equivalent of nearly a tenth of the average deposit. For those looking to buy their first home, the average stamp duty is equivalent to an even larger proportion at 15% of the average deposit.
In fact, it can be such a large cost that almost one in 10 homebuyers have capped their bid for a property in order to fall into a lower stamp duty bracket. The most likely to have done so are those living in London, at 12%, and the south east, at 13%, who also face the highest average house prices in the UK.
A third, at 31% of current homeowners said they did not pay stamp duty. This is in stark contrast to those currently looking to buy their first property as the majority, at 86%, expect to pay stamp duty.
How to pay the price of stamp duty
Worryingly, one in 10 first-time buyers turn to credit cards as a means of paying, whilst less than one in 30 established homeowners do so. Those intending to do so should carefully consider the impact this may have on their credit rating, and on the likelihood of their mortgage application being accepted.
Ian Ramsden, TSB’s director of mortgages, says: “With UK house prices rising, it should come as no surprise that the cost of stamp duty is on the up too. Yet, a worrying number of homebuyers are failing to factor this significant outlay into the overall cost of buying a home.
“With the expenditure on stamp duty equivalent to a tenth of the average deposit, it is important for potential homebuyers to factor it in to their purchase decision at an early stage. Before starting their house-hunt, people should talk to a qualified mortgage adviser to see what options are available to them. Buyers should kick start their search safe in the knowledge that they can afford the full costs of buying their dream home.”