What opportunities does the stamp duty holiday bring to advisers?

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Changes to stamp duty thresholds, especially when aimed at first-time buyers, have been a common part of the property landscape over the past decade, so it was little surprise to see the Government utilising this method again in order to incentivise purchasers and (hopefully) increase transaction levels over – this time – an eight-month period.

However, what will have surprised many is the inclusion of additional property owners within this particular stamp duty ‘holiday’, especially given the mood music that has flown around Governments of various hues in recent times.

In that regard, there appears to have been a concerted effort to stem the flow of property into the private rental sector (PRS) during that period, with landlords hit on various fronts most notably on mortgage interest relief and of course the extra stamp duty surcharge.

Now, however, we have something of a u-turn, albeit temporary and below £500k. This is perhaps based on the understanding that property supply within the PRS is not what we would want it to be, and that some degree of support for landlords would have the dual result of both stemming that loss of property out of the sector and increasing transaction levels.

So, where might the opportunities lie for advisers during this period? How might we stress the time-sensitive nature of this offering, especially during a post-COVID-19 period when many individuals crucial to the smooth running of the process are either working remotely or possibly still on furlough?

Firstly, those opportunities are not just within the additional property/second home/buy-to-let sphere, because this is a catch-all offering and, at its heart, is once again probably designed to help first-timers and those looking to make further moves up the property ladder.

In that sense, it’s obvious that the ‘elephant in the room’ is around the ongoing provision of high LTV mortgages – Moneyfacts data shows the extent of the drop in 90%/95% product options with only 84 products currently available at these levels, when the corresponding number was 1,170 in March.

Stamp duty holidays for those purchasing with smaller deposits could now allow them to utilise that money towards their deposit, rather than setting it aside for the tax, which might well get them to the next tier in terms of LTV. I’ve read anecdotally of advisers now being able to place clients on 85% LTV products, which are more plentiful, because of the holiday and it would seem to make sense for advisers to revisit those potential clients who may have been recently thwarted at a higher LTV hurdle.

And then of course there are additional property owners and landlords in particular, many of whom may well have already been viewing the current landscape as conducive to them adding to their portfolios. With pricing somewhat subdued, but rental demand still strong for good yields, the PRS still seems like a particularly good investment opportunity, especially if you are a professional or portfolio landlord.

Now, with the added benefit of the stamp duty savings – which could be as much as £15k when purchasing a £500k property – the brakes may be released and landlords might well be looking to bring forward purchases or speed them up, in order to make sure they take advantage of, what is likely to be, a one-off ‘deal’.

That being the case, I have read that landlords may wish to take their time over making such purchases because they have eight months in which to be able to complete. I might suggest otherwise, and I believe advisers will still need to stress how time-sensitive this period will be, especially noting that lender servicing is definitely not at pre-lockdown levels for many and that conveyancing firms are also in the same predicament.

There’s no doubting that everyone was hoping for an incentive-based announcement around stamp duty, but there also needs to be a healthy dose of realism presented in terms of how ‘quickly’ purchases might be able to be worked through the system. As mentioned, these are still not ‘normal times’ and, with an added workload for these crucial parts of the chain, securing mortgage offers/valuations/surveys/searches/legals and the like may take longer than anticipated.

Advisers will know only too well the existing timeframes. Factor in increased activity and, even with greater resources, those timeframes may grow ever longer. Where possible, those intent on securing stamp duty savings need to begin their journey with immediate effect. Time could be of the essence, and advisers will want to ensure that completions are maximised by the end of March next year, in order to get the right end result for all concerned.

Rob Clifford, Chief Executive of Stonebridge

Jargon Buster

When you are applying for a mortgage it can be hard to understand all the terminology and abbreviations. Here is a guide to some of the more common words you will come across.

Provided to you by a lender, confirming ‘in principle’ what they will allow you to borrow. This can be provided to agents and sellers to show that you can afford their property.

APR means the Annual Percentage Rate and APRC is the Annual Percentage Rate of Charge. These are both used to compare the overall cost of a mortgage. APR compares the cost of the mortgage for the initial fixed period (for example, the first two or five years) whereas the APRC is the overall cost of the mortgage should you pay it for the full term of the mortgage period (for example, 25 year term). A broker would use these to recommend the best mortgage, based on the initial term and the overall term and make their recommendation based on this information.  

Automated Valuation Model, also known as a desktop valuation. The lender instructs their preferred surveyors to confirm the value of the property without the need to physically go to the property. Surveyors will base their valuation on recent sales and other recent valuations. You will not receive a copy of the valuation if an AVM is carried out. 

Lenders will often charge an arrangement fee to set up your mortgage. You can choose to pay this up front or add the arrangement fee to the mortgage. If you choose to add the fee you will pay interest on the fee over the term of the mortgage. Your broker will compare products with and without fees and recommend the best deal for you. 

If you do not pay your mortgage on the date that has been agreed each month, you will fall into mortgage arrears. Should you not be able to pay your mortgage for any reason, contact the lender immediately to discuss your circumstances. 

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