First-time Buyers Hit £6,250 by SDLT Change
The March Stamp Duty race ends exhausted, with winners and losers. Rightmove reported that over half a million UK home buyers were rushing to complete a purchase before the stamp duty thresholds changed on the 1st of April. For the winners, this meant a maximum tax saving of £2,500, or £6,250 for first-time buyers; the losers either pay a higher tax bill or pull out of buying altogether.
The tax change couldn't come at a worse time for the housing market, after a sluggish start to 2025. In our January and February Housing Market Reports we've seen a focus on the end of the stamp duty deadline; however, the lack of supply of property to the market means April's sales volume will fall.
After February's interest rate cut, home buyers delayed their moving decisions, hoping the March Bank of England meeting would follow suit. This hope was dashed with inflation increasing to 3% and global market uncertainty; the Bank of England didn't make any changes.
With the stamp duty increasing and no interest rate changes, the spring may not see its normal buoyancy. According to the Royal Institution of Chartered Surveyors (RICS) a net 14% of agents and surveyors reported a drop in new buyer inquiries in February, the weakest reading since November 2023. Simon Rubinson, chief economist at the RICS said that:
“the UK housing market appears to be losing some momentum as the expiry of the temporary increase in stamp duty thresholds approaches”.
What happened in the past when there were big stamp duty changes?
The 1st of April sees what I class as a big stamp duty change because it affects both the main stamp duty rate and first-time buyers. The change reduces the main rate starting tier from £250,001 to £125,001, a maximum additional cost of £2,500, and first-time buyer relief dropped from £425,000 to £300,000, with a maximum additional liability of £6,250.
Here's some big stamp duty changes:
Additional Rate April 2016: sales volume affected for 7 months
The Government introduced the Additional Property Rate of stamp duty of 3%, which caused a surge in landlords looking to complete in March 2016.
In March 2016, there were 125,046 sales, 82% up on the previous year of 68,555. In April 2017, the sale volume fell by 126% to 55,412. Despite the extreme surge and fall on either side of the change, the rest of the months in 2016 were down by less, between 0% and -19%, and by 2017, sales volume had recovered to 2015 levels.
Covid holiday ends June 2021: sales volume affected for 2 months
From the 8th of July 2020, the Government increased the nil band tier from £125,000 to £500,000 until the 31st March 2021, it was then extended until 30 June 2021. Then from 1 July 2021 to 30 September 2021, the nil rate band was £250,000.
In June 2021, there were 169,769 sales in the month, 133% up on June 2019 (pre-Covid). In July, after the first staged increase to the nil rate band, sales were -28% versus July 2019, August was only 9% down.
Covid holiday ends September 2021: sales volume affected for 2 months.
The nil rate band returned to the standard amount of £125,000 on 1 October 2021, creating another bottleneck. In September 2021, there were 130,427 sales, up 79% on September 2019. In October 2021, the sale volume fell month-on-month by 123% to 58,463. This was -26% versus October 2019, followed by November at -10% versus 2019.
By the end of 2021, sales volume was 8% higher than pre-Covid levels.
What is going to happen in April 2025?
While this is a major change, it affects some, not all, of the market, with the biggest impact on first-time buyers purchasing over the threshold. I predict the race to complete will cause a 56% year-on-year surge for March, to approximately 110,000 sales, followed by at least a 100% fall from March to April. Sales volume will continue to be dampened by up to 20-30% for 4-6 months.
Will mortgage rates go down in April 2025?
On the 20th of March, the Bank of England announced in their Monetary Policy Committee (MPC) regarding Bank Rates that interest rates will be held at 4.5 per cent. The nine-person committee, which sets the rate, voted 8-1 in favour of holding the rate.
With such a majority vote to hold interest rates, some experts see this as a sign that the rate will remain the same for a while, certainly through the next meeting on the 8th of May.
The committee stated that the "global trade policy uncertainty has intensified" in recent weeks, requiring a cautious approach to changing the rate, citing US tariffs and other countries' responses. This, alongside the increase in inflation, meant the BOE had very little choice but to hold interest rates.
The Bank of England Governor Andrew Bailey acknowledged this uncertainty but also said:
"We still think that interest rates are on a gradually declining path".
The housing market will play a cat-and-mouse game around the upcoming MPC announcements on Bank Rates, on the 8th May, 19th June, 7th August, 18th September, 6th November, and 18th December.
During these meetings, most experts predict two rate cuts ending in 2025 at 4%, although Nina Skero, from the Centre for Economic and Business Research, disagrees with this as she predicts there will only be one more.
Landlord optimism set to boost the housing market
UK landlords are more optimistic than previously thought about the buy-to-let market, according to a survey of 300 landlords by Market Financial Solutions. It found that a third of landlords plan to expand their portfolios in 2025, while 43% expect yields to improve.
Diverging trends: Average price growth amidst Sales Volume decline
England & Wales
November 2024 saw a concerning sales volume of just 44,657 transactions, a stark 22.7% decrease from the already low figure of 57,260 in November 2023. This represents a dramatic market slowdown, particularly compared to the 10-year peak of 86,667 sales in November 2018.
Despite this significant drop in sales, average house prices have continued their upward trajectory. November 2024 recorded an average price of £284,798, a 3.27% increase from the previous year.
This consistent price growth, even in the face of declining sales, highlights the enduring demand that's propping up the market. In the last 12 months, we can see a steady increase, with January 2024's average price rising by approximately 4.9% to £285,963 by January 2025.
A closer look at specific property types reveals a significant price surge from January 2024 to January 2025. Detached houses, for example, saw an increase of approximately 4.5%.
Semi-detached houses jumped by approximately 5.9%, and terraced houses by approximately 5.9%. Flats and maisonettes, while also experiencing growth, saw the smallest relative increase, at approximately 2.1%.
This data indicates a strong market for houses and a potentially more affordable market for first-time buyers looking at flats and maisonettes. Overall, the data points to a market where buyer confidence, reflected in sustained price growth, is at odds with declining sales volume.
Mortgage approval reports
Home buyers
Despite the significant volatility of the mortgage and remortgage market over the past five years, we have seen a strong recovery from the low point in February 2023 (-37% YoY). February 2025 saw an 8% increase to 65,481 on February 2024 (60,496) which itself was a positive 40% increase from 2023 (43,218).
A notable driver of the surge in mortgage approvals for house purchases was the Stamp Duty deadline on 31st March 2025. Buyers scrambled to get their mortgage approved and in place before their tax bill came through.
Mortgage payments are cheaper than rent
Zoopla data suggests that first-time buyers would pay, on average, 20% less monthly on mortgage payments than when privately renting. The data is based on their having a £50,000 deposit. Zoopla calculated that the average first-time buyer's mortgage payment of £1,038 per month would be around 20% lower than the average rent of £1,248.
Bank of England sets out stress test scenarios for lenders
The Bank of England has set out scenarios of its 2025 stress test for banks, which includes a hypothetical model to test how they would cope with a rebound in UK inflation to a peak of 10% and a 2% decline in global GDP.
The test highlights potential financing risks for banks and their borrowers should the markets change to these levels.
Remortgages
The remortgage market presents a different picture. February 2025 saw a 12.2% decline YoY, with remortgages falling to 31,976.
This suggests homeowners are remortgaging with caution, potentially due to the recent rise in inflation to 3% and uncertainty surrounding future interest rate movements.
The next few months are vital to observe, as the Stamp duty deadline passes, and the effects of the previous 4.5% base rate cut take hold.
What are the current mortgage rates for homebuyers?
The current average 5-year fixed rate mortgage is 4.74% and the current average 2-year fixed rate mortgage is 4.84%. However, the lowest available 2-year fixed rate is 3.86% and the lowest available 5-year fixed rate mortgage is 3.96%. Source: Rightmove.
If your current mortgage deal is about to end (in the next 3-6 months), you should start the remortgage process before the best rates disappear. You'll want to avoid being put on your lender's Standard Variable Rate (SVR) which is on average around 8% - much, much higher than the average fixed rate mortgage.
How many new-build properties are being built?
Data from the Ministry of Housing, Communities and Local Government (MHCLG) reveals starts were 33,750 in Q3 2024 (15% up year-on-year) and completions were 30,710 (20% down).
The government's target of 300,000 new homes per year, remains a key policy objective. Streamlining planning processes, securing development land, ensuring skills availability, expanding infrastructure, and incentivising private enterprises will be crucial if Labour wants to reach its target.
New Build prices: Is the premium justified?
The allure of new-build properties, with their modern amenities and energy efficiency, continues to command a significant price premium. However, the latest figures raise a critical question: is this premium sustainable, and does it represent a sound investment?
In November 2024, the average new-build property price reached a staggering £435,862. This represents a dramatic increase from £355,054 in November 2023, an increase of approximately 22.76%. This is a far greater increase than the average house price across all property types and the steepest increase on record.
Given these figures, buyers must carefully consider the added value of new builds against the substantial price premium. Typically, new builds lose around 7% of their value as soon as they are owned, much like buying a brand-new car. While the appeal of modern living is undeniable, the long-term investment potential hinges on market stability and sustained demand for these properties.
CEO and Author | SAM Conveyancing
Housing Market Opinion
In a sluggish market, with regular base rate changes and the new Trump Effect on global markets, the last thing the housing market needed was an end to the beneficial stamp duty incentive.
Once the dust settles in April, we'll see how the market chooses to react to paying more stamp duty. For some, factoring in this additional cost will leave their home move plans unchanged. First-time buyers purchasing under £300,000 will be unaffected, but supply issues remain if homeowners can't afford the extra SDLT to move.
The 8th May meeting is a crucial one for the Bank of England and the mortgage market. Whether they cut at this meeting is unlikely as inflation is set to increase in April when prices for the new tax year come into effect on bills such as energy, water and council tax. I predict the base rate will be cut soon after, in the meeting on the 19th of June.
Stability is the focus, and the market needs to find its feet again after the stamp duty change on the 1st of April.
Sources: Latest data from - Gov.UK, Bank of England, UK House Price Index, ONS and Property Mark (NAEA).
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
Without Killing Anyone
This book could be the difference between every mover’s dream, buying and moving into your new home stress free, or, stress, missed deadlines, legal disasters, building defects, and possibly the collapse of the whole transaction. (Costing you a small fortune, a head full of grey hairs, and, driving you to threaten the life of your solicitor, lender, co-owners, family, partner, or some combination of all five).
With more than two decades’ experience in the conveyancing sector and over 50,000 successful client moves under his belt, Andrew shares insider tips and advice to empower you as a buyer, giving you the tools to make the best decisions for your circumstances and ease the chaos.
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