How to take advantage of the Stamp Duty Holiday
It seems frightening to even be talking about this, but if you intend to take advantage of the current Stamp Duty Holiday and require a mortgage, you need to be acting now! Lender delays, a clogged up legal system, lockdown 2.0, a backlog of valuations and legal searches is a recipe for delays that will only increase as we head into the new year. This is why you should act now, and how you can expedite your mortgage application:
What is the current Stamp Duty Holiday?
From now, until 31st March 2021, there is no Stamp Duty payable for the first £500,000 of a property purchase. So if you are buying at this level or below, there is nothing to pay. If you are buying above £500,000 it is effectively a £15,000 discount off your usual stamp duty bill. So nothing to be sniffed at. This also includes Buy-To-Let purchases, however the 3% surcharge still applies, but you will still get this discount off the first £500,000 as outlined above.
Why do I have to act now?
As alluded to above, we are seeing mortgage applications taking longer and longer to process. The reason is obvious as Covid has knocked out many resources a mortgage lender would normally lean on. HSBC is a typical example of this – pre-Covid, they were super slick. You would submit an application, it was then sent to their processing centre in Manilla who worked overnight on the case (due to the time difference), which meant they turned around things very quickly. That centre has been intermittently closed and UK resources also pegged back due to lockdowns.
Barclays is a very similar story to how they worked with their Indian centres. We are not knocking those lenders as all lenders are suffering such issues, this is just to explain why this is happening. That is also before you get to the added burden of most cases now having to be manually underwritten. Previously, most cases could be light touch or automated, but as so much has changed since March mortgage lenders are rightly looking at each application. Therefore this increases the workload while they have a decrease in capacity to do so, which equals the delays we are seeing.
With lockdown, it is harder for surveyors to get to properties, so these are now bottlenecking. Some lenders do have good online models to use, but especially in London, high value property and flats fall outside these models, so it will be felt more acutely in London and the South East than the rest of the country.
House Prices are also soaring. Halifax’s house price index is showing house prices at their highest level EVER. Prices are up 7.5% in the last 12 months alone. Will this continue into next year? Difficult to judge, but its hard to see prices coming down in the short term. So to save you money, it will be best to move sooner rather than later.
Can I speed up my mortgage application?
Engaging with a quality mortgage broker will save you weeks in this process. Mortgage brokers know exactly how to package for each lender, and crucially, have contacts within the lenders as if anything does go wrong (which happens more times than you would like to know about…) we know who to call on to fix the issues.
Having a good solicitor is equally important. Please do get a recommendation from a friend, broker or local agent. This is where a cost cutting exercise can really bite you. If you ‘save’ £500 by using a slow lawyer, but then you miss the deadline above, it could cost you up to £15,000. Surely that isn’t worth the risk? Now more than ever, pay for the best outcome as you’ll never save the money in using a cheaper firm if the deadline is missed.
What Happens if I complete after 31st March 2021?
Game over. Do not pass Go, do not collect £200. In fact, your Stamp Duty bill may go up by £15,000.
Naturally, we would do all we can in our power to ensure your mortgage offer is out in time, but as the mortgage is just half the equation with the legals being equally important, you really need to get your ducks in a row.
Please talk to one of our advisers today about how we can help you. As the closer we get to March, the less chance there is of you being able to take advantage of this Stamp Duty holiday.
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