The recent government Budget has proposed numerous changes affecting the property and housing sector, with some welcomed more than others for many first-time buyers looking at getting on the property ladder. The significant changes in the announcement are primarily aimed at increasing affordable housing and ending the stamp duty reliefs at their current threshold.
We will now look at these particular changes announced in the autumn budget and what the new budget means for future first time buyers.
Good or bad news first?
The bad news…
Stamp Duty relief to change
The stamp duty threshold that was elevated for first time buyers in September 2022 is set to return to its lower threshold.
What is Stamp duty (SDLT)?
Stamp duty is a tax that is charged to a buyer when they purchase their home. The amount of tax that is charged by the government depends on whether they are purchasing their first home or an additional property.
Currently first-time buyers are covered by a SDLT relief which means they can pay a reduced amount of SDLT or none at all depending on the purchase price. For example, if a first-time buyer wanted to buy a property that was £425,000 there would be no stamp duty to pay on that property. However, the buyer would still be eligible for a 5% discount if the purchase price was between £425,001 and £625,000.
First time buyers will continue to benefit from the relief at its current threshold until March 2025. As of 1st April 2025, the stamp duty rates for first time buyers will drop to £300,000. This means buyers will only be relieved from paying stamp duty if they purchase a property for £300,000 or less. Therefore, any main residence for first time buyers purchased between £300,001 and £500,000 will get 5% first time buyers’ relief.
As a result, the lowered stamp duty threshold will undoubted impact many first time buyers. For example as of the 1st April 2025, first time buyers purchasing a property for £425,000 will have an additional £6,250 to pay. Whereas currently, there would be no stamp duty to pay. It is likely to delay purchasing decisions for many and may prevent them buying all together due to the additional costs incurred. Another element to consider is the surge in transactions between now and the change to the threshold in April 2025 which could amount to property chains falling through.
The good news…
Affordable Housing Investment
On a positive note, the government has pledged to invest 5 billion pounds to increase the housing stock and the supply an additional 5000 affordable homes. This could enable first-time buyers to have a broader selection based on their budget and their individual needs.
Mortgage Guarantee Scheme
Another positive development for first-time buyers is the mortgage guarantee scheme to be made permanent. This scheme allows lenders to offer 95% mortgages to first-time buyers to purchase their property decreasing the need for significant deposits, which can be an important barrier for new homeowners. This initiative will benefit buyers who intend on borrowing with a small deposit in the future. Increasing more opportunities for first time buyers to get on the property ladder.
In light of the autumn budget, there are several factors to consider when purchasing your first property. At Austin and Carnley Solicitors our team of experienced Solicitors and Conveyancers are here to help.