• Research by Trussle and Legal & General Mortgage Club finds that removing the Stamp Duty Land Tax (SDLT) holiday’s hard deadline could avert the collapse of property transactions worth up to £28bn¹

• Trussle calls on the Government to consider adopting a ‘tapered’ end to the SDLT holiday as it considers extending the tax break 

• Transactions falling through will likely cost buyers in the region of £5,439.80²

25th February - New research by online mortgage broker Trussle and Legal & General Mortgage Club has revealed that the economy could benefit from a £28 billion injection³ if the Government ‘tapered off’ the Stamp Duty Land Tax (SDLT) holiday rather than sticking to a hard stop. 

The SDLT holiday is currently due to end on 31st March 2021 and it’s estimated that as many as 105,000 property transactions could collapse if buyers are unable to complete before this deadline⁴. Using the average UK property price of £269,150⁵, the value of property transactions that are likely to fall through due to the holiday’s hard stop could be as high as £28 billion.⁶ 

However, a ‘tapering off’ of the holiday could be an alternative and fairer way to bring the scheme to a close. This would involve guaranteeing the tax break to buyers who received a mortgage offer, for example before 1st February, helping to avoid the collapse of property chains dependent on the savings from the holiday to complete and prevent an additional swath of purchasers from rushing in, adding to the current pressures. 

Any extension to the holiday should therefore be targeted at helping people already well underway with their property purchase, to avoid any additional issues of cliff edges to the scheme. This would also prevent a situation where HM Treasury would lose additional SDLT funds from the transactions that fall through as a result of missing the current deadline. 

Tapering the holiday could support medium term growth in the housing sector too, supporting jobs at a time when thousands of workers have been furloughed and contractors laid off, providing medium term confidence that avoids stop-start volatility in the market. The sector already supports 700,00 jobs, according to the Home Builder’s Federation and it is a critical component of the Government’s recovery plans and ambition to ‘Build, Back, Better’.⁷ 

For consumers, a tapered ending to the SDLT holiday would also help protect homebuyers from unexpected financial strain. A failed house purchase can be a costly affair for buyers, with a late stage collapse costing on average £5,439.80 in estate agent fees, valuations, surveys and legal costs.⁸ 

For those only just starting to consider a home purchase, it’s important to note that they will not benefit from an extension to the SDLT holiday as the impact of COVID-19 has continued to cause delays in the homebuying process. However, even if buyers are not able to take advantage of the current exemptions, there is still a range of alternative support available, particularly for those stepping onto the ladder. The Help to Buy Equity Loan scheme remains open to first time buyers as a way of stepping into a new build home with just a 5% deposit.  In addition, first time buyers in England and Northern Ireland are already exempt from SDLT for house purchases on the first £300,000 of a property’s value.⁹ Those in Scotland and Wales are exempt from Stamp Duty up to the first £175,000 and £180,000 respectively. 

This year a number of lenders have also started to return to the market with 90% loan to value mortgage products. While the number remains low compared with previous years, there are more than double the amount of 90% deals available now than in September 2020.¹⁰

Miles Robinson, Head of Mortgages at online mortgage broker Trussle, comments: “There’s been some discussion about simply extending the Stamp Duty Land Tax holiday beyond its current deadline. However, this is unlikely to solve the problems posed by a hard stop to the scheme as we’d still find ourselves in a situation where thousands of homebuyers miss out and have to front the unexpected SDLT bill.

“There will be a significant number of current buyers who are dependent on the savings from the holiday to be able to afford their house purchases, and it’s likely that many will pull out if they are unable to complete in time to meet the 31st March deadline. A ‘tapered’ ending, that guarantees the holiday to buyers already in the process, could avert a situation where we see thousands of housing transactions collapse. With the Budget fast approaching, we’re calling on the Government to consider taking another look at how to bring the scheme to an end.”

Kevin Roberts, Director, Legal & General Mortgage Club comments: “Amid concerns about the wider impact of the COVID-19 pandemic, the Government’s decision to offer a Stamp Duty Land Tax holiday last year has helped to position the housing market as a driving force behind the economic recovery. 

“However, the COVID-19 crisis has also caused delays in the housing market and our research shows that at the peak of activity it was taking up to 17 weeks to complete on a property purchase. This means there are consumers who started their homebuying journey last year in the hope of taking advantage of the tax incentive, but who are now unlikely to complete before the current deadline. Some of these buyers might not have put aside the funds to pay for Stamp Duty, which could mean their purchase falls through.

“Overall, we would like to see a broader review of property taxes including SDLT to assess the different impacts on an evolving property market. Until this happens, we would encourage the Government to consider a tapering of the scheme in the upcoming Budget, this would help to avoid the potential for significant disruption in the housing market. A smooth transition would also support future growth in the housebuilding sector, which has the potential to turbocharge growth as part of the Government’s recovery plans.

~Ends~

Methodology

Fees for a housing transaction calculated by -

• Estate Agent fees 1% + VAT (£269,150 / 100 x 1.2) = £3229.80¹¹

• Valuation = £210¹²

• Survey = £500¹³

• Legal fees = £1,500¹⁴

Contact

For further information, please contact:

Emily Coyle at [email protected] or Leilah Mackie at [email protected] 

We’ve taken extra care to ensure the information provided within this release is presented in a way that’s compliant with regulatory requirements. If you have any questions about how to repurpose this information or require any further assistance, please contact Leilah Mackie at Trussle.

About Trussle

Trussle is your free online mortgage broker, helping you wherever you are on the ladder.

Our technology and expert mortgage advisers enable us to make better mortgage decisions in minutes, providing greater certainty and speed about your home financing options.

See how much you could borrow or save in minutes. Whether, you’re looking at homes for the first time, or you’re looking to remortgage for the fourth time. Our quick online calculators will help you take the next step on your home ownership journey.

Trussle is a trading name of Trussle Lab Ltd, which is authorised and regulated by the Financial Conduct Authority (firm reference 924229).

Your home may be repossessed if you do not keep up repayments on your mortgage.

More information can be found at https://trussle.com/ and Trussle’s press pack is available here.

ABOUT LEGAL & GENERAL

Established in 1836, Legal & General is one of the UK’s leading financial services groups and a major global investor, with international businesses in North America, Europe, Middle East and Asia.   

With almost £1.2 trillion in total assets under management at 30 June 2020, we are the UK’s largest investment manager for corporate pension schemes and a leading global provider of pensions de-risking solutions, life insurance, workplace pensions and retirement income. As part of our commitment to inclusive capitalism and building a better society for all, we have invested over £25 billion in direct investments such as homes, urban regeneration, clean energy and small business finance. 

Legal & General Assurance Society Limited Registered in England and Wales No. 166055. Legal & General Assurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered office: One Coleman Street, London EC2R 5AA. 

Legal & General Insurance (LGI)

Legal & General Insurance (LGI) has been offering life insurance cover since 1836 and is the UK’s number one individual life insurance provider. Our group protection business in the UK offers life insurance and income protection products to individuals through their employers and we offer term-life insurance in the US. We now have over four million UK life insurance policyholders, over two million people in group protection schemes and approaching 1.4 million US term-life insurance policyholders.

Here in LGI, we protect our customers and their loved ones throughout life and death. 

Life cover: https://www.legalandgeneral.com/life-cover/