According to research from broker L&C Mortgages, almost a third of first-time buyers (31%) are unsure whether the recent stamp duty changes will benefit them, leaving them underestimating what they can afford. So, what do the changes mean, and how do they affect first-time buyers?
What do the rules say?
Following the latest tax reform, there are now two sets of rules to establish the amount of stamp duty first-time home buyers will need to pay:
1.People buying their first home will pay no stamp duty on homes that cost up to £300,000
2.When purchasing a home that costs up to £500,000, no stamp duty will be charged on the first £300,000.
This means first-time buyers can save up to £5,000 compared to existing homeowners buying and selling.
However, according to the research, of those planning to buy a property priced between £125,000 and £500,000, 42% either thought that stamp duty relief would not benefit them, or didn’t know if it would.
Does the stamp duty cut go far enough?
Not according to first-time buyers. In fact, 62% believe that the Government should abolish stamp duty altogether for first-time buyers.
Also, 48% feel that the value of the properties excluded from stamp duty should rise in line with house prices.
It is clear, therefore, that the recent measures will need to be kept under close review to ensure they deliver benefits longer term.
Removing the confusion
It has come apparent that, due to confusion over the cost of stamp duty, more clearly needs to be done to ensure that first-time buyers know what they can afford.
Stamp duty relief is most certainly a positive step, but if first-time buyers don’t know how it affects them, the benefits will be reduced.
According to L&C Mortgages “the lack of understanding uncovered through our research could mean that some first-time buyers think that owning their own home is one step further away than it actually is”.
Karen James, Head of Residential Property at Ramsdens added: “Relieving stamp duty for first-time buyers has been a welcome innovation, I would like to see similar reliefs being introduced for ‘last-time buyers’ i.e. those downsizing to smaller properties which would encourage the older generation to free up much needed family-sized housing stock.”
For more advice on buying your first home or further information on whether the changes to stamp duty may benefit you speak to one of our expert team by calling 01484 821500 or email getmoving@ramsdens.co.uk.