Stamp Duty Rush: Santander’s Response to Stamp Duty Holiday

Santander UK has seen a 130% surge in mortgage applications due to the stamp duty rush, as buyers hurry to secure homes before 2025 changes. This uptick can be largely attributed to a rush of buyers eager to complete their property purchases before the upcoming reduction in stamp duty on 1 April 2025. The stamp duty changes will cause substantial shifts in homeownership costs. This will particularly affect first-time buyers and other buyers across the UK.

This article explores the surge in mortgage applications and upcoming stamp duty changes. It also examines homebuyer trends, first-time buyer challenges, and shifting behaviours.

Understanding the Upcoming Stamp Duty Changes

Stamp duty, which is a tax applied to property purchases in England and Northern Ireland, is set to undergo significant changes starting on 1 April 2025. These revisions will directly impact both first-time buyers and subsequent buyers, with reductions in the stamp duty threshold that could result in higher costs for many.

First-Time Buyers: A Major Shift

For first-time buyers, the current nil-rate threshold stands at £425,000. However, from 1 April, this will be reduced to £300,000. This reduction means that first-time buyers purchasing homes above this threshold will find themselves paying stamp duty at the same rate as other buyers.

The change will especially affect homebuyers in areas with higher property values. In the South East, the average house price is £385,600. First-time buyers can save up to £4,280 in stamp duty by buying before 1 April. After the new rules take effect, first-time buyers of homes over £500,000 will face the same stamp duty rate. This will lead to a significant cost increase.

Other Buyers: Rising Costs

For other types of buyers, the changes will bring about a reduction in the stamp duty threshold from £250,000 to £125,000. Properties valued between £125,000 and £250,000 will attract a 2% stamp duty rate, potentially increasing the cost of purchase by up to £2,500.

These changes are set to increase the cost of buying a home for a broad section of buyers, including those purchasing properties in the mid-range of the market. Buyers who previously enjoyed stamp duty exemptions or lower rates will now find themselves paying more.

The Rush to Secure Properties Before the Deadline

In light of these impending changes, many homebuyers are rushing to complete their property transactions before the new stamp duty rules come into effect. This has caused a sharp rise in mortgage applications. Santander UK reported a staggering 130% increase in the final quarter of 2024. The bank attributes this surge to homebuyers’ desire to secure properties before 1 April 2025, when stamp duty will increase for many.

Delays in the Process: Time Constraints for Buyers

The typical mortgage process takes around four months from receiving an offer to completing the purchase. Given that the stamp duty changes are scheduled to take effect on 1 April, buyers are now under increasing pressure to secure their properties before the deadline. This urgency is likely contributing to the spike in mortgage applications, as individuals and families seek to finalise deals ahead of the changes.

In response to the rush, Santander’s Graham Sellar, head of intermediary channel – mortgages, shared his thoughts. He noted that buying a home, whether a first or forever home, comes with significant costs. Every penny counts when considering legal fees and removal costs. Therefore, it’s great to see many securing homes before 1 April.”

The Impact of Stamp Duty Changes on First-Time Buyers

First-time buyers are expected to be the most significantly impacted by the upcoming stamp duty changes. These buyers will see the largest increase in potential costs, as many of them are currently able to take advantage of a higher stamp duty exemption threshold. Once the new rules come into effect, many first-time buyers will be required to pay more stamp duty, and for some, the cost could be substantial.

Regional Variations in the Impact

The effect of these changes will vary greatly depending on where buyers are looking to purchase. In London, where average house prices are higher, first-time buyers could face considerable additional costs after 1 April 2025. For instance, the average price of a home in London stands at £535,700. After the threshold reductions, first-time buyers of properties over £500,000 will pay the same stamp duty as next-time buyers. This change could add up to £11,250 in extra costs.

In contrast, first-time buyers in regions with more affordable housing markets, such as parts of the North and Midlands, may see a less pronounced impact. Even in these areas, the stamp duty threshold reduction could still increase costs. This affects those buying higher-end homes.

Compromising on Location

To maximise the stamp duty holiday, first-time buyers are acting quickly. Many are also willing to compromise on location to secure a property. Research reveals that a growing number of first-time buyers are purchasing properties in areas they have not personally visited before. In fact, 67% of first-time buyers in the past two years had never seen their new neighbourhood before making a purchase. This is a notable increase compared to just 51% of buyers who made similar compromises more than five years ago.

The willingness to compromise on location highlights the pressure that first-time buyers are under to secure a home before 1 April. Many buyers are looking beyond their immediate neighbourhoods to take advantage of the stamp duty holiday. This sometimes means moving to unfamiliar areas.

Financial Implications for Homebuyers

The financial implications of the stamp duty changes are significant, especially for those who are already facing the high costs of buying a home. Buyers have always considered stamp duty a major expense. Besides the deposit, they also face legal fees and other property purchase costs. The upcoming changes are likely to increase the financial burden on many homebuyers, particularly those in higher-price regions.

First-Time Buyers’ Potential Savings

First-time buyers can save a significant amount if they complete purchases before the new stamp duty rates. Acting quickly is essential to maximise savings. Santander UK’s research shows that first-time buyers in the South East could save up to £4,280 in stamp duty. They can achieve this by completing their purchase before 1 April 2025. These savings can be used for other aspects of the home-buying process. For example, they could cover renovations, furniture, or increased moving costs.

For many first-time buyers, these savings could make the difference between affording a property or being priced out of the market entirely. Those who miss the 1 April deadline will face significantly higher costs. As a result, it may become harder to secure the property they want.

Shifting Trends in the Housing Market: Stamp Duty Rush

The rush to complete property transactions before the stamp duty changes is also part of a broader trend in the UK housing market. Homebuyers are looking for ways to minimise costs and secure the best deal. Stamp duty is a key factor in many buyers’ decisions. Saving thousands of pounds in stamp duty can make a big difference. This is especially true for first-time buyers facing high costs to get on the property ladder.

Increased Demand for Mortgages

The surge in mortgage applications is a direct response to these trends. As the 1 April deadline approaches, more and more buyers are applying for mortgages in an effort to secure properties before the changes take effect. This has placed additional pressure on banks and mortgage lenders, who are working to process a higher volume of applications in a short period of time.

Despite the increase in mortgage applications, experts warn that buyers should not rush into a decision without carefully considering their options. It is important for homebuyers to take the time to assess their financial situation and ensure they are making a sound investment. Saving money on stamp duty is an important consideration. However, it should not be the only factor in a homebuyer’s decision.

Conclusion: Navigating the Stamp Duty Changes

In conclusion, the upcoming stamp duty changes will significantly impact homebuyers across the UK. The stamp duty threshold reduction will raise costs for many buyers. This change will especially impact first-time buyers and high-end property purchasers. This has led to a sharp rise in mortgage applications, as buyers rush to complete their purchases before the deadline.

The stamp duty holiday provides significant savings for buyers who complete purchases before 1 April. However, it creates challenges for those missing the deadline. As the housing market continues to shift, homebuyers will need to be more strategic than ever in order to secure the best possible deal and avoid additional costs. For first-time buyers, especially, this means considering location, affordability, and timing when making a purchase.

The changes to stamp duty serve as a reminder of the complexities involved in the home-buying process. Rising costs and increased competition make it crucial for buyers to carefully weigh their options. Additionally, planning ahead is essential to navigate the housing market challenges successfully.