Stamp Duty holiday | All about the numbers

stamp Duty Holiday Rose Capital Partners

This blog could well have been entitled ‘A love letter to Rishi Sunak’, as we are major winners from the announcement last week. The Stamp duty holiday is very welcome and long overdue (more on this below), we will benefit as a firm as all of our staff will return from Furlough and we will also step up our efforts to find some more Trainees to join us. I have been far from complimentary on our Government since the election, but credit where credit is due. I am also mindful that while we are winners, many aren’t. As the quote famously attributed to Abraham Lincoln goes:

All about the numbers Rose Capital Partners

So I suspect if I was running a Sports Hospitality company in the North East I would not be as happy and why the above quote has been so enduring.

Stamp Duty Holiday

The big one for us in the property world was the holiday of Stamp Duty on purchases up to £500k.

The fact it applies to all buyers, is a huge plus, as that essentially saves nearly all our clients £15k off the bat.

That has 2 major benefits:

  1. It will keep up the momentum we have seen in the property market post lockdown, and indeed will give a boost to those thinking of buying, who are able to do so, as the holiday comes to an end on 31st March 2021.
  2. The bigger win we are seeing is that for a lot of buyers we are dealing with, this means they are now able to scrabble together a deposit (especially with how much money many have been able to save during lockdown), but crucially, it is taking a lot of people from a 10% deposit to a 15% deposit.

Deposit Levels

Just to expand on the second point above, this is a huge thing for the people we deal with, especially those up-sizing and buying for the first time.

Currently, if you have a 10% deposit, you are experiencing the biggest rate differentials I have ever seen for the sake of a 5% deposit. It isn’t so much of an issue below £500k but at that level and higher, it has a real impact.

So to illustrate my point, below are some purchase prices and likely ‘best rates’ you will be offered:

  • Up to £500k = 1.84% 2 year fixed rate
  • Between £500k-555k = 2.84% 2 year fixed rate
  • £555k to  £1.111m = 3.47% 5 year fixed rate

While in historical terms, even a rate of 3.47% for a 90% deal at that level is very cheap (just ask your parents what rate they paid on their mortgages…), when the base rate is a 0.1%, yes, it is comparatively expensive, especially when you compare that to the same brackets but with a 15% deposit, which looks like:

  • Up to £500k = 1.64% 2 year fixed rate
  • Between £500k-555k = 1.84% 2 year fixed rate
  • £555k to  £1.111m = 1.99% 2 year fixed rate

If you put the saving in stamp duty, plus the reduction in rate outlined above, the savings run into tens of thousands over just a 2 year period, let alone if you factor in the lifetime saving on a lower rate.

Stamp Duty holiday until 31 March 2021

So it looks like this window, from now until 31st March next year, if you are looking to buying and or gearing up, presents the biggest opportunity you are likely to see for a very good while.

Exactly why I put the quote above, as it won’t mean the same for everyone, but if you are in the South East of England and have a smaller deposit, you really should grasp this opportunity as I suspect this stimulus will reverse the trends we have seen in lower prices very soon. So don’t miss out!

Market update 13.7.20

Rate Corner

Money markets continue their slow downward trajectory. So our consistent view for a long time that we expect just more than one base rate rise in the next 5 years, seems to be the expectation now. However, I feel that is an overly pessimistic view based on people’s opinions right now, so we may well see more than that. It does look clear that rates are staying very low, for a very long time.

In the last week:
3 Month Sterling Libor = down by 0.017% at 0.120%
2 Year SWAP = down by 0.015% to 0.174%
5 Year SWAP = up by 0.020% to 0.235%

Best Rates:

2 Year Variable from 1.05%
2 Year Fixed Rates from 1.06%
5 Year Fixed Rates from 1.34%
BTL Rates from 1.19%

The actual rate you will be offered will be dependent on your personal circumstance and deposit level. Please Contact one of our advisers so that they can guide you through this process

Source: Twenty7Tec July 2020

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Rose Capital Partners Limited is an appointed representative of PRIMIS Mortgage Network, a trading name of Advance Mortgage Funding Limited which is authorised and regulated by the Financial Conduct Authority.


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