One of the big dilemmas for people considering whether to take the plunge and buy a house or flat is whether they should do it now – and try to take advantage of the Stamp Duty (SDLT) holiday – or wait to see how the housing market settles into 2021.
It’s a dilemma not just because the clock is ticking increasingly rapidly on the March 31 deadline for the Stamp Duty threshold and we don’t yet know whether Rishi Sunak will extend it, but also because of last year’s upward trend in house prices.
Many people are surprised by recent figures that show on average UK house prices ended 2020 around between 6% (according to the Halifax) and 7% (Nationwide) higher than they began it.
In simple economic terms it’s not difficult to explain: the uplift in the SDLT threshold last June created demand that outstripped supply, and in an economy where demand is greater than supply, prices generally rise as sellers take advantage of more buyer interest.
Now, though, those who are considering moving are facing a different problem.
Do you commit to a move now to give yourself a chance of getting in under the Stamp Duty wire, but risk losing a proportion of it in paying more for a house you could have got much cheaper six months ago?
Or do you wait, in the hope that the uncertainty in the economy brings house prices down over the course of the year to a level that’s closer to where they were this time last year?
The first issue here is whether you could even get a house purchase across the line in eight weeks to beat the SDLT deadline.
The fact is that while eight weeks in which to complete is pretty challenging, it’s not impossible if you’ve got all your paperwork organised and you’ve got a good surveyor and solicitor (or conveyancer) lined up and ready to go.
We would also always advise people to use a professional mortgage adviser to arrange their mortgage for them.
A good mortgage broker should be able to spot any potential issues with your application, help you to present your financial information in the right way to help to avoid any unnecessary delays further down the line.
So, let’s assume that one way or another, you’re committed to moving at some point in the foreseeable future and that completion is achievable by March 31. What, then, are the associated risks of ploughing on or waiting?
The most important thing to consider is the one absolute certainty here: if you complete your transaction by March 31, you will save up to £15,000 on your house purchase costs (the precise figure you save will depend on the agreed purchase price).
Put another way, as things stand and unless the Government extends the SDLT holiday, if you do nothing or you can’t get your purchase over the line in time, you are not guaranteed to save any money at all.
So, what of the variables and unknowns? The biggest of these is house prices.
Will they go up, stay the same, or go down? The truth is that no-one ever knows for sure what they’ll do – and, as last year proved spectacularly, external factors that can’t possibly be predicted can have a seismic effect on the market.
Although Rightmove is predicting a somewhat bullish 4% increase in house prices during 2021, the conservative view seems to be that seems to be that they will either flatten out or drop. By how much is anyone’s guess, but 1.5% is a figure that has been quoted widely.
But the reality is that if you’re looking at buying a house that’s currently worth £500,000, then that property’s value would need to drop by more than 3% for you to see a financial advantage in waiting and missing out on the Stamp Duty holiday.
It’s also worth bearing in mind that once you’ve bought your property, the purchase price is almost irrelevant until you come to either sell it, or remortgage.
And of course, it’s also possible that you could move before March 31, save yourself up to £15,000 in SDLT and then see house prices go up – which would be a win-win for those who bet on the Stamp Duty holiday but a double whammy for those waiting for prices to fall.
In the end, every decision is a personal one based on individual priorities. When all is said and done, your decision is really about whether you try to secure a guaranteed saving or gamble on the market falling.
Whatever you decide, it’s probably worth talking to a professional mortgage adviser to explore your plans and the choices that are open to you.
Oportfolio Limited is an appointed representative of Primis Mortgage Network, a trading name of First Complete Limited which is authorised and regulated by the Financial Conduct Authority
Your property may be repossessed if you do not keep up repayments on your mortgage.
Oportfolio Ltd fees are payable on application. We charge a broker fee for property purchases of £495 and a remortgage/further advance fee of £395. Our product transfer fee is £295.